Welcome to Corporate StoreFront, Inc.

Licensed, Registered & Bonded Legal Document Assistant, #0311, in the State of California, Los Angles County (exp. 5/09).

Estate FAQ

Do I Need an Attorney to Form a Will or Living Trust?

No, an attorney is not required in order to form a Will or Living Trust. You can prepare the legal paperwork and file it yourself, or use a professional legal documentation service such as Corporate Storefront, Inc. With our lawyer-free service, you can save up to 85% off the rates an attorney would charge for the same procedure. In addition, 70% of those who try to complete their own legal documents make mistakes. Our legal professionals will ensure that your documents are filed correctly and are treated with the utmost care and attention.

However, if you have questions that you cannot resolve on your own, or if your estate will face significant taxation, or if you believe that your spouse or children may challenge your living trust, then you should definitely consult with a licensed attorney.

GENERAL

Why Should You Avoid Probate?

Probate is the legal process that the courts use to distribute your wealth and assets at death. Probate typically takes six months to three years to complete. It may also require the service of a lawyer. Even if you die without a will your estate must still pass through the probate system. In that case, the court will decide how to distribute your estate among your relatives. The typical probate procedure includes the following steps:

The state form will is filed with the local probate court (and becomes public record).
Your family conducts an inventory of your property.
Your property is appraised.
All debts, including death taxes, are paid.
The court validates the will.
Court costs, attorney's fees and executor's fees are paid from the estate.
Then, and only then, the remainder of the estate is distributed to your loved ones.

A living trust can help avoid probate. The reason for this is because your assets are placed into a trust, you do not "own" the assets, the trust does. You can still control the trust assets as if they were your own, but when you die, you do not "own" the trust property and therefore, you avoid probate for the assets placed into the trust.

However, as previously mentioned, you will still need a simple will for any property not included in the trust. So long as all of your significant property is transferred into the living trust, then probating this pour-over will should be a rather simple process.

What Happens if You Die Without a Will or Living Trust?

If you die without a will (known as "intestate"), the state, and not you, will decide how your property is to be distributed. In many states, your property will be distributed as follows: First, all of your joint property will pass to your spouse (if you have one). Second, your separate property will pass according to these rules:

If you have a spouse, your spouse receives:

All of your property if you leave no children, parents, siblings, nieces or nephews
Half of your property if you leave one child or one or more parents, siblings, nieces or nephews
One-third of your property if you leave two or more children

All property not given to a spouse is distributed to the following persons, in this order:

Your children
Your parents
Your brothers and sisters, or, if they are not living, their children
Your grandparents, or, if they are not living, their children (i.e. your uncles and aunts)
Children of your deceased spouse
Relatives of your deceased spouse
The State of your legal residence

What are Estate Taxes and How much are They?

A Living Trust organizes your financial and personal interests so that your wishes are met with a minimum of inconvenience and expense to your family. Creating a Living Trust can also assure that your estate incurs the minimum possible estate tax. The following is some general information regarding estate taxes:

The federal estate tax is imposed on the transfer of an individual's property at death.
The decedent's taxable estate equals the value of the total property transferred at death (the "gross estate") reduced by authorized deductions.
The gross estate can contain property interests of all kinds, including life insurance, jointly owned property, and under certain circumstances, property the decedent gave away before death.
The estate tax return must be filed within nine months after the date of the death.
There has been an increase in the amount of property that you can leave your heirs free of estate tax. In 2006, this allowance is $2,000,000, and it will gradually increase to $3.5 million by 2009. The highest marginal tax rate on the remainder of your estate will correspondingly drop from 50% in 2001 to 45% in 2009.
Due to the Economic Growth and Tax Relief Reconciliation Act of 2001, the future of the estate tax is uncertain. The estate tax is currently subject to complete phaseout in 2010 but a so-called "sunset" provision reinstates the estate tax in 2011.

If you have additional questions concerning the tax implications of a living trust or estate taxes, Corporate Storefront, Inc. recommends that you consult with a licensed tax professional.

LIVING TRUSTS
What is a living trust?

A Living Trust gathers together all your significant property into one document. It allows your property to be distributed easily and quickly after your death. The trust, not you, owns that property. This doesn't mean that you no longer have control of your assets. Since you, the grantor, will usually appoint yourself as the trust's initial trustee, you still have complete control of your property. You can do what you want with that property - you can even transfer some property out of the trust or add property to it.
How Does a Living Trust Avoid Probate?
This is where a Living Trust earns its value. A Living Trust does not save you penny while you are alive, but after death they can eliminate the need for probate -- and most importantly, probate fees and estate taxes. With a Living Trust, your surviving family members can transfer your property quickly and easily, without probate. More of the property you leave goes to the people you want to inherit it.
If I Create a Living Trust, Do I Still Need a Will?

If you choose to create a Living Trust, you should also create what is called a pour-over will. It provides for the distribution of any property that is not included in the trust. It will also allow you to name a guardian for any minor children.

A will acts as back up to deal with any property that is not included in the living trust, either because it was improperly transferred or acquired after the creation of the trust. A will also covers property that was intentionally left out of the trust (e.g. cars, personal checking accounts).

A pour-over will is included in the Corporate Storefront, Inc. Living Trust.

What is a Declaration of Trust?
A Living Trust is created with a document known as a Declaration of Trust. This is the legal document which names your beneficiaries, describes your trust property, and provides for the terms of its transfer. The living trust is managed by the trustee; in most cases, the initial trustee is the person who forms the living trust. You may later designate someone else or an institution, like a bank, to act as a trustee. The trustee is also responsible for managing the property covered by the trust.

Are There Different Types of Living Trusts?
The two most common types of living trusts are: a basic living trust (for an individual or couple), which avoids probate, and an AB trust, which both avoids probate and saves on estate tax.
Basic Living Trust -- allows property to avoid probate and to quickly and efficiently pass to the beneficiaries you name, without the hassles and expense of probate court proceedings. A married couple can use one basic living trust to handle both co-owned property and the separate property of either spouse.
AB Trust -- unless you expect to owe federal estate tax at your death or your spouse's, a basic living trust to avoid probate is probably all the trust you need. (Fewer than 2% of estates -- those worth more than $2 million -- owe estate tax.)

How is a Trust Generally Created?
To create a basic living trust, you make a document called a declaration of trust, which is similar to a will. You name yourself as trustee -- the person in charge of the trust property. If you and your spouse create a trust together, you will be co-trustees.
Then you transfer ownership of some or all of your property to yourself in your capacity as trustee. For example, you might sign a deed transferring your house from yourself to yourself "as trustee of the Jane Smith Revocable Living Trust dated July 12, 20xx." Because you're the trustee, you don't give up any control over the property you put in trust.
In the declaration of trust document, you name the people or organizations you want to inherit trust property after your death. You can change those choices if you wish; you can also revoke the trust at any time.
When you die, the person you named in the trust document to take over -- called the successor trustee -- transfers ownership of trust property to the people you want to get it. In most cases, the successor trustee can handle the whole thing in a few weeks with some simple paperwork. No probate court proceedings are required.

What Type of Property Should be Included in a Living Trust?

In order to take advantage of the benefits of a living trust, you must transfer property into the trust. The person who transfers property into a trust is called a "grantor." In general, your most valuable property should be placed in your trust. This may include: your house; other real estate; business interests, including stocks, bonds and mutual funds; money market accounts; brokerage accounts; royalty contracts, patents and copyrights; jewelry and antiques; precious metals; works of art; and valuable collections.

Real Estate: Although you do not need to transfer real estate held in "joint tenancy" or "tenancy by the entirety" because it automatically transfers to the other person if one owner dies, it may still be a good idea to transfer this type of property into a living trust. This is because both owners could pass away in a common disaster, or the surviving owner could forget to place the property into a living trust at a later time. You should read your home deed to determine how the property is owned.
Small Business Interests: If you have a small business, sole proprietorship, partnership interests, closely-held corporation or LLC, you should consider placing the interest in the living trust. Please be aware that S-corporations have restrictions on ownership by trusts.

Property that is of little value need not be placed in a living trust, because it may be exempt from probate or subject to a streamlined probate process. Other items that usually need not be included are:

Personal Checking Accounts.
Property that you buy or sell frequently: This is especially true if you do not expect to own the property when you die.
Cars: Most cars are not terribly valuable and most insurance companies may be reluctant to insure a car owned by a trust. If, however, you do own a valuable car, it may make sense to check with your insurance company to see if it will insure cars owned by trusts.
IRA's, 401(k)'s, etc.: Technically, such accounts or funds cannot be owned by a trust. You can still avoid probate on these monies if you directly name a beneficiary to receive the funds in those accounts when you die.
Life Insurance: Your policy will directly designate a beneficiary.
Income or Principal from another trust: If you are entitled to leave interest or principal from another trust to your own beneficiaries, you may not do so through your living trust. You may do so only through your will.

Even after transferring your property into a living trust, you can sell your property in two ways. The first, and most common, approach is simply to sell the property directly from the trust. In that situation, the seller of the property is the trust, not you. The second approach, used mostly when an institution requests it, is to transfer the property out of the trust back to you as an individual and then sell it.

How Is the Property Transferred Out of the Living Trust When You Die?

There are three types of beneficiaries of a living trust:

Primary Beneficiaries: these beneficiaries are designated to receive specific property.
Alternate Beneficiaries: these beneficiaries receive property if the primary beneficiary dies before you.
Residuary Beneficiaries: these beneficiaries receive all property not left to either the primary and alternate beneficiaries.

In general, you may choose anyone or any entity you wish to be your beneficiaries. In a community property state, you are not required to leave anything to your spouse. That is because both spouses are deemed to own half of everything earned during the marriage. However, in separate property states, your spouse may have a strong claim to set aside part of your trust if you leave him or her less than one-third to one-half of your property. In addition, minor children in many states have the right to inherit the family residence. If a court finds that the challenger has a valid claim, your trust is not entirely invalidated. The court will modify the trust to accommodate the claims of your spouse and/or children. It is relatively easy to avoid these problems if you are careful when designating your beneficiaries.

You can leave property to children through a living trust. If you desire, you can keep the property in trust and designate an adult to manage the property on behalf of the child. This is called a children's subtrust. The subtrust will end when the conditions you specify are satisfied; for example, when your child turns 21 or when she graduates from college. It is important to remember that you cannot designate a guardian for your minor children through a living trust; you should do this through a traditional will. If you want to exclude a child from your trust you should state your intention explicitly. If it appears that you unintentionally overlooked one of your children in your trust, a court may modify the trust for that child's benefit.

Do I need to set up separate record keeping for the living trust?

No, as long as the grantor acts as the initial trustee of the trust.

Can I transfer property in and out of the trust while I am alive?

Yes. If you have an individual trust you can transfer property without getting anyone's consent. If you have a shared trust, you should get your co-trustee's consent when transferring jointly-owned property.

Do I still need a will if I set up a living trust?

Yes. A will acts as back up to deal with any property that is not included in the living trust, either because it was improperly transferred or acquired after the creation of the trust. A will also covers property that was intentionally left out of the trust (e.g. cars, personal checking accounts). The Corporate Storefront, Inc. Living Trust includes a simple will for this purpose.

Can I include property in my trust on which I still owe money?

Yes. The most common example of such property is a house still subject to a mortgage. Your beneficiary will be responsible for that debt when he receives the property from the trust. If you want to structure your trust so that all debts will be paid from the trust upon your death you will need to consult an attorney.

Does a living trust avoid estate taxes?

Your estate is still vulnerable to estate taxes. It is important to remember, however, that there is no estate tax assessed on an estate worth less than $1,500,000 for a single person in 2005. In addition, an AB living trust may allow you to effectively double this exemption.

Can a living trust protect my assets from being used to cover catastrophic medical costs?

You should be aware that including a catastrophic illness clause in your trust cannot shield your assets adequately. If you are concerned about this you should consult an attorney.

When should you update a living trust?

You should change your trust by giving the trustee a signed, written amendment to the trust in the following situations:

there is a change in your marital status
the birth or adoption of a child
you move to another state
there is a significant change in your financial status
one of your beneficiaries dies
there is the death or incapacity of a named trustee.

Can I make a loan from my trust to a beneficiary?

Yes, as long as you provide for this power explicitly in your trust. You may make a loan, which the beneficiary must pay back with interest. You may allow the beneficiary to repay the loan with money the beneficiary would receive from the trust.

In a similar vein, you can make it clear in the trust that the trustee can make payments for the benefit of a beneficiary (e.g. college tuition for a child).

If I Want to Create a Living Trust, Does it Matter if I am Single, Married or Divorced?

Both married and unmarried couples can create living trusts. They can each create their own individual trust and/or a joint, shared living trust. Married couples should also factor in whether their state is a community property or separate property state.

For most married couples, a basic shared living trust makes the most sense. Each member of the couple acts as a co-grantor and co-trustee of the trust. However, each person may choose any beneficiary she desires for her share of commonly owned property and for individually owned property in the trust. Both persons will have control over all of the property in the trust. Either person may revoke the trust at any time. If that happens, the ownership of the property returns to where it was before the trust was created.

When one of the co-grantors (spouses) dies, the property originally contributed by that spouse will be distributed. Any property distributed to the surviving grantor will remain in the trust. The trust then continues until the death of the second grantor.

On the other hand, there are several good reasons to create individual trusts. An individual trust may make sense if you and your spouse own most of your property separately. Individual trusts may also make sense for you if you do not want your spouse to have control over the property you contribute to the trust, or if you are recently married and want to keep your previously acquired property separate.

You should keep in mind that creating individual trusts can be an awkward task for jointly-owned assets. That requires that you and your spouse sign and record two new deeds that transfer your half-ownership of the property to the trust. The best bet is to form a separate joint living trust for your joint assets.

WILL

What is a Will?

A living will is a document outlining very specific medical instructions that apply while you are still alive, but are unable to communicate your wishes. Unlike a typical Last Will and Testament, it really has nothing to do with how you want your property divided when you die. It simply states that you do, or do not, want artificial life support if you become either:

terminally ill and will die within a short period of time without life support, or
in an irreversible coma or vegetative state.

A living will also allows you to make decisions regarding whether or not you would like to receive pain medication and artificial nutrition. In addition, you can indicate special wishes or instructions. For example, some people may want to remain on life support for only a certain period of time.

What happens if you die without a will?

If you do not make a will, state laws will determine who gets your property. This process is called "intestate succession." In most states your property will first be divided among your spouse and children. If you are not married and have no children, then your property will be distributed to your next of kin. If the courts cannot find your next of kin, then the property goes to the state.

Does a Basic Will Avoid Probate?
No. If you leave anything more than a small amount of property through a will, probate court proceedings will probably be necessary after your death. Although it varies from state to state, probate can take six months or a year, and eat up three to five percent of your estate in lawyers' and court fees. And your beneficiaries will probably get little or nothing until probate is complete.
But if you need only a basic will, you have little reason to concern yourself now with probate. If you're relatively young and healthy, and you don't have piles of money, your real concern is to make legal arrangements for the statistically unlikely event that you will die suddenly and unexpectedly. You've almost certainly got plenty of time to plan for probate avoidance later.
Why do I Need a Will?

Today, life support systems can keep an individual's body alive for years, even if the brain is no longer functioning or the person is in constant pain.

As competent adults, we have a constitutional right to make advance decisions as to whether or not we would like to decline life support when it is clear that death is imminent or a state of coma or vegetation becomes permanent.

A living will is a document which states whether or not you want to be kept on life support if you become terminally ill or are in a persistent vegetative state. In addition, it addresses other important issues such as tube feeding, artificial hydration and pain medication. A living will is only effective if you are unable to communicate your desires on your own.

Just as importantly, a living will can indicate your desire to remain on life support. Whatever your decision, the key is to put your wishes in writing.

Can I Cancel by Will?

A living will can be cancelled or revoked. You can revoke your living will at any time without regard to your mental or physical condition. A revocation is effective upon its communication to the attending physician or other health care provider by you or anyone who witnessed you revoke your living will.

Do I need Witnesses to Attest to My Will?

Because of the gravity of this decision and its potential result, witnesses are required to verify that a living will document states the true intentions of the maker. Also, the witnesses must not have any stake in your estate, i.e. they must be someone you do not intend to give something to after your death.

Is my out-of-state will valid if I move?

If a will was validly made while you were living in another state, it is probably valid in your new state. However, if your will was not "self-proved," it may not be accepted by certain courts until the witnesses sign an oath swearing that they saw you sign your will. Because of the expenses involved in finding your witnesses, it is probably best to rewrite your will after moving to another state.

Most states allow a will to be self-proved. The Corporate Storefront, Inc. will contains a self-proving affidavit so that, were you to move to another state, the will would likely be valid without the expense of tracking down witnesses.

What makes a will legal?

There are only a couple of requirements to make a will valid and legal:

Soundness of Mind: The person signing the will cannot be mentally ill or disabled and must be acting of his or her own free will, without undue influence from others.

Witnesses: At least two people (three in some states) must watch you sign the will. They cannot be related to you and cannot be entitled to receive anything under the will.

In addition to these provisions, the law also requires that a will's appearance be uniform: all important sections must be entirely typewritten or computer generated, or they must be entirely handwritten. You do not have to get your will notarized. However, Corporate Storefront, Inc. allows you to "self-prove" the will, which requires that a separate affidavit be notarized. The advantage of self-proving is that witnesses do not have to be tracked down after your death.

Can I make a handwritten will?

A handwritten will is called a "holographic will." It is valid in about 25 states so long as all material provisions and clauses are entirely handwritten. However, because most handwritten wills are not as in-depth as the Corporate Storefront, Inc. will and because they are oftentimes not properly written, we do not recommend them. The court can be unusually strict in determining whether a holographic will is authentic. More importantly, we do not recommend that people revise their wills by hand.

Do I have to file my will with a court or in public records?

You do not have to file your will with a court or other governmental authority immediately after you sign it. Upon probate, however, the will must be filed with the court and will become public.

Can I disinherit someone?

You can leave anyone out of your will without a problem, unless it is your spouse or your child. Many laws have been enacted to protect spouses and minor children. Be sure to read the section "Marriage, Divorce and Children" in the "Wills Law Library" for more information.

If you wish to disinherit one of your children or give one child less than another, you should clearly state that intention in your will and the reasons why. The law has special protections for minor children. For instance, they are protected from the loss of the family home. You cannot give your home to someone else if your child will have to move from the home.

What should I do with my will after I sign it?

After you sign your will, you should keep it in a safe place that is easily accessible. Be sure that the person you appointed as your personal representative knows where you placed your will. You do not have to file it with the court or public records. However, depending on how busy and crowded they are, some courts may store your will.

Can I change or revoke my will after I make it?

You can revoke a will any time before death by making a new will, which states that all prior wills are no longer valid. To revoke a will without making a new one, all you have to do is intentionally tear it up, deface it, burn it or destroy it. If this is done accidentally, then the will is not revoked.

What happens if you make a new will (which revokes all prior wills) and then decide that you like your old will better? You need to make a whole new will that replaces the new one and mimics the old one. The old will is invalid and cannot be revived after it has been revoked.

One way to make changes to a will is to make a codicil, which is an amendment to a will. However, a codicil must be signed and witnessed just like a will, so it is usually easier just to make a new will.

Be sure not to make changes to your will after it has been witnessed and signed. If you cross out a person's name or add a clause to a will that has already been signed, you risk making the whole will invalid.

OTHER
What is a Health Care Power of Attorney?

A health care agent is a person who you have a close relationship with and can trust to make medical decisions on your behalf in the event you are unable to make decisions. A legal document which appoints a health care agent is sometimes known as a "health care power of attorney."

Unlike the provisions of a standard living will, an agent is able to make decisions on your behalf even if you are not terminally ill or in an irreversible coma, so long as you are not able to make these decisions on your own. In addition, it provides a back-up in case a hospital does not fully honor your intentions in the living will. In some cases, the provisions of a living will are combined with the health care power of attorney. The Corporate Storefront, Inc. Living Will allows you to combine a living will with the appointment of a health care agent. In addition, it will nominate an alternate health care agent should your first choice be unable to serve.

What is a Guardianship?

If you have minor children, naming a guardian for them is one of the most important considerations in your will. Typically, if one parent dies, the surviving parent will remain responsible for the children. However, complications arise if both parents die simultaneously, or if one parent has re-married. Unless you name guardians for your minor children in your will, the court decides who takes custody of the children in those situations.

If you have a spouse who is legally the mother or father of a child, then in most cases you should appoint the spouse as guardian. If you choose to appoint someone else, the court will balance your desires with what is in the best interest of the children. For example, if you are remarried and you want your current spouse (and not the natural parent of the child) to be the guardian, you may want to state your reasoning on why your current spouse would be better for the children. Corporate Storefront, Inc. gives you the option of writing these instructions in the Special Directives Clause.

Guardians are responsible for a child's health, education and other daily needs. They are also responsible for managing a child's property (unless a testamentary trust has been created for the child – see "Testamentary Trusts" below).