Category: Estate Planning

Estate Planning: Irrevocable Trust vs. Wills

Irrevocable Trusts

There is no one-size-fits-all approach to estate planning. What works well for one person or family might be different for someone else, depending on factors such as the size of their estate, whether they have young children, etc. When deciding on an appropriate estate plan, one of the more common questions people have is about the difference between a will and an irrevocable trust.

Most people already know what a will is—i.e., a written document detailing how a person wants their assets distributed after they die—but they may not be as clear on how a trust works and even less clear about irrevocable trusts. Here is some brief information on what an irrevocable trust is and some of the main benefits and drawbacks of including one as part of your estate plan.

What Is an Irrevocable Trust?

A trust is an agreement to hold and administer property for the benefit of someone else. There are generally three parties involved: a grantor, the person who creates and funds the trust; the trustee, who is legally responsible for managing the trust and its assets; and the beneficiary, the person who receives the benefits of the trust. For example, if a grantor created a trust with an apartment building as its sole asset, a trustee would manage the building and send payments from the rental income (or whatever the terms of the trust dictate) to the beneficiary. A trust can be created by a will when the grantor passes away (known as a testamentary trust) or created while the grantor is still alive (a living trust).

When people talk about irrevocable trusts, they are referring to a type of living trust. It is irrevocable because once created, they take on a life of their own and cannot be changed or revoked without the consent of all the named beneficiaries. In addition, the grantor cannot take assets back from the trust. This is in contrast to a revocable trust, where the grantor retains some control. But it is the inflexibility of the irrevocable trust that gives it some advantages.

The Advantages of an Irrevocable Trust

Living trusts, in general, provide some great benefits for estate planning. Namely, the assets in a living trust avoid the probate process altogether after the grantor dies, and they are not subject to an estate tax. In addition, irrevocable trusts have a few additional benefits precisely because the grantor no longer has any control over the trust property.

First, the income from property in an irrevocable trust is no longer taxable income for the grantor. The grantor of a revocable trust, on the other hand, may be taxed on this income (though they are not taxed from income that goes to a beneficiary). Second, the assets of an irrevocable trust are safe from creditors. If the grantor declares bankruptcy or is required to pay damages from a lawsuit, the trust assets can’t be touched because the grantor no longer owns them.

What is the main disadvantage of an irrevocable trust? There is a clear tradeoff: control vs. the security of the assets. Once created, the grantor cannot change their mind. Anyone considering an irrevocable trust should carefully consider every consequence and obtain legal advice from an attorney.

Evaluate Your Estate-Planning Options

An irrevocable trust is a powerful tool to protect your assets and to provide for those you care about, but they require great care in their implementation. Legal advice from an experienced estate attorney is indispensable when creating the right plan for your specific needs. Contact us today to schedule an appointment.

Estate Planning with Digital Assets

Digital assets have grown massively in popularity in recent years. One need only look at the explosion of cryptocurrency and non-fungible token (NFT) trading to understand how much money is being invested in this area. With this growth has also come a new, and sometimes tricky, set of considerations for those trying to plan their estates.

What Are Digital Assets?

A digital asset is a uniquely identifiable property or material that exists only in digital (i.e., nonphysical) form and includes a legal right to use it. The term can be applied to a wide variety of properties. Here are a few common examples of digital assets:

  • Audio or video files 
  • Internet domain names
  • Photographs and images
  • Business data
  • Software
  • Cryptocurrency
  • NFTs

Questions of ownership or other legal interest can be challenging with digital assets, as they are so easily copied. For instance, downloading a logo from a website does not give you any right to use it for your own purposes, much less sell it to someone. Ownership often may be demonstrated by documentation such as a copyright, bill of sale, etc., but sometimes it is almost entirely a question of who has the password, token, or other means of accessing the asset. In terms of estate planning, it is important to establish what it is you actually own and whether it can be transferred to someone else.

Keeping Track of Passwords

One of the biggest problems with transferring digital assets after someone has passed away is surprisingly mundane: no one has the passwords to access them. The assets may be encrypted on a hard drive or server, or may require an online account login, but the decedent never wrote the passwords down anywhere. Sometimes this issue can be resolved by proving the transfer of ownership to, say, the data storage company or email provider, but that is not always possible. Cryptocurrency has become notorious for this problem. There are several examples of investors losing very large amounts of money after misplacing their password.

Therefore, a key aspect of your estate plan should be to keep track of all passwords and store them in a secure location that can be accessed in the event of your death.

Additional Considerations for Digital Assets

For the most part, digital assets are treated like any other property that makes up your estate, but there are a few specialized concerns to keep in mind. The first is that it’s important to document all of these assets. This may apply to any estate property, but it is especially easy for an executor or administrator to overlook digital assets or simply be unaware of their existence. Cryptocurrency trading, for example, is virtually anonymous, so unless you’ve told someone about your holdings no one will know about them.

In fact, cryptocurrencies present a few challenges for estate planning and administration. Despite the name, the IRS considers cryptocurrency to be property, not currency (analogous to company stocks). The value of cryptocurrencies also tends to be rather volatile, potentially creating unexpected tax consequences. It helps to keep regular records tracking the values of these assets.

Southern California Estate Planning Attorneys

Digital assets have created new and potentially lucrative investment opportunities for many people, but making sure these assets are passed on to your successors takes careful planning and organization. Our experienced estate planning attorneys can help make sure these assets end up in the right hands and minimize the tax burden on your estate. Contact our office today to schedule a consultation.

Estate Planning Terms to Know

A Brief Glossary of Terms

As part of wise financial planning, estate planning is something everyone should consider even for those who do not have a lot of assets. To help get you get started, here are some common terms you may encounter.

Administration

Court-supervised process wherein the executor or representative collects and distributes an estate during probate. 

Assets

Property or anything that you own. This includes real estate, your home, investments, jewelry, and other valuables & collectibles.

Beneficiary

The beneficiary is the person or organization who receives the trust assets in the case of a living trust. 

Codicil 

An amendment to the terms of a will where no rewriting is necessary.

Deed

A deed is a physical document that declares your legal ownership of a property, and also allows you to transfer that property ownership to another person.

Durable Power of Attorney

If you become incapacitated, durable power of attorney directs an individual of your choosing to make financial and medical decisions on your behalf.

Executor

Also called a personal representative, the executor is the person named in a will. They are appointed by court to administer the deceased’s estate. Females may be referred to as the “executrix.”

Fiduciary

Associated with trusts, fiduciary describes the relationship between the trustee and beneficiary. A fiduciary is also legally charged to act on behalf of another person or persons, taking care of their assets.

Grantor

The grantor is the creator of the trust. Also known as the settlor, donor, or trustor. 

Heir 

An heir is entitled by law to receive your property or asset if there is no will.  

Holographic Will

A document entirely handwritten and signed by the testator.

Irrevocable trust 

As the name suggests, this type of trust cannot be terminated, revoked, or amended by the grantor.

Joint tenancy 

This refers to equal joint ownership of a property by two or more persons, and creates a Right of Survivorship.  

Living Trust

A written legal document that creates an entity to which an individual transfers ownership of their assets. This document is created during the individual’s lifetime and is not subject to the public probate.

Marital Trust 

Also known as an “A” trust, this type of trust lets you transfer your assets tax free to your surviving spouse in the event of your death. 

Power of Attorney

This is a written authorization whereby one individual may act on behalf of another as an agent when it comes to legal and financial matters. Terminates upon the death of the person granting authority, unless “coupled with an interest.”

Probate

The legal process of authenticating a decedent’s will, taking inventory and appraising the estate, and distributing the assets according to the decedent’s last wishes. If there is no will, the process for probate remains the same. In this case, probate is still required to pay any outstanding bills and distribute the assets to the designated beneficiaries.

Revocable trust 

A revocable trust can be terminated, revoked, modified, or amended by the grantor.

Special Needs Trust 

This is a specialized trust that allows a disabled individual to supplement benefits the person with special needs may receive from government financial aid. 

Trust 

A trust is a fiduciary relationship in which a trustor gives another party (the trustee) the right to own and manage property for the beneficiary.

Will 

Wills take effect after your death and they lay out your final wishes for how to dispose of your property.

Your Southern California Estate Planning Attorneys

While this list is by no means extensive, we hope that these terms piqued your interest when it comes to estate planning. More importantly, we encourage you not to wait until you are ill or incapacitated to prepare your loved ones for the future. To help you factor in all outcomes and for solid legal advice, our experienced Southern California estate planning attorneys at Hoffman & Forde are here to help.

When you invest resources towards estate planning, you’re investing in peace of mind. Our boutique law firm has experts across disciplines and relevant industries to make sure all your bases are covered. We tailor your estate plan to you and your goals with our creative solutions and collaborative approach. Call us today for a consultation.

Best Probate Attorney in San Diego

Losing a loved one is difficult enough, much less dealing with probate issues. If you are facing probate concerns or disputes, lean on the legal experts at Hoffman & Forde. Find out why we’re some of the best probate attorneys in San Diego in this post.

What Is Probate?

In short, probate is the legal process of dispersing a person’s estate after their death. It involves taking inventory, appraisal, and distribution according to the last wishes of the deceased. But if there is no will, the probate process is still required to pay outstanding bills and distribute assets to designated beneficiaries.

Of course, probate court can be a tricky matter involving contentious disputes, relationship strains, and financial stress. But sometimes probate is necessary to settle disputes between heirs, especially since not everyone has the luxury of estate planning with an attorney beforehand. But with the risk of high costs and a prolonged process in court that could take anywhere from months to several years, it’s important to choose a probate attorney who has the experience and expertise to guide you into a favorable result.

Hoffman & Forde: Top Probate Attorneys

Hoffman & Forde is known for excellence across a range of practice areas, and probate is no exception. We work hard to make sure that issues are resolved as quickly as possible, bills and debts are settled, and the estate is distributed accordingly.

Why trust us with your probate concerns?

  • We’re knowledgeable of the complexities of probate disputes and estate administration
  • We have years of experience under our belt with utmost client satisfaction
  • We prioritize listening to your goals and offering practical solutions
  • We pride ourselves on dedication and honest communication with clients
  • We keep fees cost-effective while still providing undivided attention and top service

Secure One Of The Best Probate Lawyers In San Diego

Don’t leave anything to chance. When you need a top probate attorney in San Diego, Los Angeles, or throughout Southern California, Hoffman & Forde is here to provide quality representation.

Contact our probate law firm today and give yourself peace of mind in difficult times.

What You Need to Know About Estate Planning

Estate Planning for Everyone

Thinking about your last will and testament may seem morbid. But as the pandemic has shown us, families have reconsidered the importance of preparing for the worst. In the early stages of the pandemic, there was a surge of people rushing to draft their last will. As we have previously written, these people include “parents of young kids, medical professionals in the frontlines, and the most vulnerable among us.” Estate planning is something everyone should consider even for those who do not have a lot of assets. 

Prepare for All Outcomes

Estate planning is not just getting your affairs in order in the event you die. In case you get incapacitated, having a plan in place will help your loved ones with decision making. Even the most careful drivers get into accidents and even the healthiest of people still fall ill. Here are options you need to know to account for all outcomes.

Last Wills

These take effect after your death and provide a road map for how you wish to dispose of your property and assets. Wills can be subject to probate, which is a publicly-recorded process to verify the validity and authenticity of a will. 

Trusts

These are also known living trusts. These are not subject to the public probate and can be revocable or irrevocable. One big difference between the two is that with irrevocable trusts, you waive the rights to control your assets and assign a third party as the legal owner of your estate. Both types have their pros and cons as you consider tax implications and other factors.

Healthcare Proxies

With this option, you name someone to make medical decisions for you on your behalf, including the type of medical treatment you receive or refuse. This is also otherwise known as the medical power of attorney.  

FPOA

The financial power of attorney or FPOA is similar to healthcare proxies but it applies to financial decisions including purchase of property, paying bills and taxes, managing financial accounts, and others.

Business Succession Planning

This helps family-owned businesses protect their assets in case of death or incapacitation. With many logistical and financial decisions to consider, make sure your business is prepared and included in your estate plan.

Your Southern California Estate Planning Attorneys

Don’t let the courts decide the fate of your children in the event of your death or incapacitation. Distribute your assets the way you would want by specifying it in your last will. Don’t wait until you are ill or incapacitated to prepare your loved ones for the future. Factor in all outcomes and consider legal counsel as you plan for your estate. Our experienced Southern California estate planning attorneys at Hoffman & Forde are here to help.

As a boutique law firm, we have experts across disciplines and relevant industries. With our creative solutions, your estate plan will be tailored to you and your goals. Invest in legal advice and set up your family for the future for peace of mind. Contact us today for a consultation.

What is probate and how does it work?

Senior man with clipboard signing document

When it comes to estate planning, you may have encountered the term probate. In this blog post, we define what probate is, when it’s required, and what’s involved. 

What is probate?

Probate is a legal term and process to verify a deceased person’s last will and testament, if they created one. It involves the following:

  • Authenticating the will
  • Appraising and inventorying the deceased’s property and assets
  • Paying off the decedent’s debts including taxes
  • Distributing the assets to the beneficiaries. If there is no will, state law will direct how the property and assets are distributed.

Probate laws vary by state. According to the California probate code:

In a probate case, an executor (if there is a will) or an administrator (if there is no will) is appointed by the court as personal representative to collect the assets, pay the debts and expenses, and then distribute the remainder of the estate to the beneficiaries (those who have the legal right to inherit), all under the supervision of the court. The entire case can take between 9 months to 1 ½ years, maybe even longer.

Source 

What estates need formal probate?

Certain estates need to go through probate court. Just because there is a will doesn’t always mean that probate court can be avoided. Typically, probate court is necessary when a will is unclear, contested, or when only the deceased holds the assets in their name.

In California you must go to court if the decedent’s property is worth more than $166,250. The probate case starts with a Petition for Probate. This form has options such as Petition for Probate of Will and for Letters Testamentary and Petition for Letters of Administration.

How does probate work?

Here are basic steps to take when dealing with the deceased’s estate: 

  1. Determine the executor. If there is a will, the representative of the estate is the executor named in the will. If there is no will, the court will appoint an administrator to be the representative.
  1. Fulfill the executor’s duties. After the executor’s been identified, they fulfill duties that include (but are not limited to):
  • Securing the decedent’s property
  • Collecting documents such as copies of the death certificate
  • Collecting assets and death benefits
  • Managing digital assets (such as documents stored online) and canceling subscriptions
  • Preparing the decedent’s final income tax returns
  • Notify creditors
  1. Identify the heirs and beneficiaries. When it comes to naming those who have the right to inherit, “beneficiaries” are the recipients if there is a will. Heirs refer to those who have the right to inherit, but there was no will created (otherwise known as “dying intestate”). Figuring out who the heirs or beneficiaries are isn’t always simple even if a will is present. For instance, the will may not have been updated prior to the loved one’s death or no changes were made after a divorce. In cases like these, consult with a lawyer to identify the heirs or beneficiaries.
  1. Inventory the estate. The executor will take stock of the property, put together descriptions for each asset, and determine the assets’ values at the time of death. Property includes tangibles (such as jewelry, cars, or furniture) or non-tangibles (such as stocks and bonds); real property includes things permanently on land like a house. As the executor inventories the assets, it’s also important to note how the decedent came to own the property. Some helpful questions to ask include who it was purchased with, whether it’s co-owned or not, and whether it’s community property or not. There are other factors to consider and where legal assistance will prove beneficial. The decedent’s taxes and final bills also need to be paid off, and taxes due will be paid from the estate account.
  2. Distribute the assets. Once the previous steps are complete, the assets will then be transferred to the heirs or beneficiaries.

How Our Probate Attorneys Can Help

Probate should be avoided as much as possible. Planning with an estate attorney in advance can save you the headache of probate court, potential relationship strains, and financial stress. One advantage of probate is having the court settle disputes between heirs. But you also run the risk of higher costs and a drawn-out process that could take anywhere from a few months to several years. 

 Hoffman & Forde’s probate lawyers are here to help you navigate probate disputes and estate administration. As a boutique firm, we draw from diverse practice areas and decades of experience so your case is covered from all angles. We keep fees cost-effective while still providing undivided attention and high-end legal services for our clients in San Diego, Los Angeles, and Orange County. Contact us for a consultation today.

Your Primer on Wills and Trusts During Coronavirus

Not Just for the Wealthy and Elderly

The coronavirus has forced everyone, regardless of age, to reckon with their own mortality. We are seeing an uptick in non-senior citizens who are drawing up their last will and setting up trusts with an attorney. These individuals include parents of young kids, medical professionals in the frontlines, and the most vulnerable among us. The idea of preparing and securing your final instructions in light of so much uncertainty is driving the surge, and this is true even for those who do not have a lot of assets. In this post you’ll learn what wills and trusts are, and why you need an estate planning attorney for such important documents.

The Difference Between Wills and Trusts

Wills and trusts are both methods of transferring an estate, but there are key differences. Wills take effect after your death and they lay out your final wishes for how to dispose of your property. On the other hand, a trust is effective as soon as you create it. With trusts you allow a third party to hold your assets on your behalf and specify how and when your assets pass to your beneficiaries.

Wills can be subject to probate, which is a publicly-recorded process to verify the validity and authenticity of a will. Probate also refers to the general administration of a person’s estate without a will. Trusts are not subject to probate court while wills are. The time it takes to probate an estate will depend on factors such as the complexity of the estate. But whether or not there is a will, probating an estate will cost you significant time and money.

Trusts, also known as living trusts, require active management and they can be revocable or irrevocable. In revocable trusts, you (the settlor) can designate yourself as the trustee to control assets within your trust and you have freedom to change the trust rules. With irrevocable trusts, you waive certain rights to control assets and the third party (trustee) would legally own the estate. One advantage to irrevocable trusts is the reduced estate tax, but note that you’ll have little to no ability to amend your trust rules.

Other Legal Documents to Consider

There are also other legal documents to consider during this time. These include healthcare proxies, which allow you to choose end-of-life treatment for yourself. You assign an agent to make medical decisions on your behalf in case you are unable to do so. Another document is the financial power of attorney (FPOA), which is similar to health care proxies but applies to financial affairs. With FPOA, you designate someone to manage your finances if you become incapacitated. Both of these documents fall under the general term “durable powers of attorney.”

Do I need a Wills and Trusts Attorney to Draft These Documents?

When it comes to managing your assets, now is not the time to DIY. Save yourself and your loved ones a lot of money and legal hassle by hiring a professional. Regardless of the method you choose for handling your assets, you should seek advice from legal, tax, and financial professionals. A boutique law firm like Hoffman & Forde gives you access to all of these relevant practices needed to draft your documents according to your unique needs.

Our experienced Southern California estate planning attorneys will help you on the best estate plan for you and your family. Each plan must meet state guidelines and we fully understand how these can impact your documents. With the world constantly changing and with so much uncertainty, prepare now and invest in legal advice to set up your family for the future. We’ll ensure your wishes are carried out the way you want them to and get peace of mind. Call us today for a consultation.