California Living Trusts: How to create a Living Trust?

When creating a California living trust there are certain things you should know. First of all the State Bar of California warns consumers to watch out for Do-It-Yourself living trust books, forms, and software services. That's because without an experienced attorney to help a person properly navigate the process, the simple forms usually provided by California Do-It-Yourself services can and oftentimes do lead to mistakes. Instead, the State Bar suggests that a person probably ought to think of California DIY trust services as good starting places to learn about creating an estate plan but shouldn't rely upon them to competently draft their own living trust.

In addition, the California State Bar warns that many of those promoting estate planning and living trusts, really are in it to sell life insurance, annuities, or some other financial product that pays them a large commission. In the process they might help a consumer get into some type of trust but the price one pays might be dear not only in dollars but possibly also in "questionable" legal documents with lifelong unfavorable ramifications.

On the other hand, many consumers understandably are concerned about overpaying for a living trust in California. And indeed, attorney pricing can be a tricky thing here. For instance, the location of a law firm's office might be a huge determinant in the price you pay for a Living Trust. A firm in Beverly Hills for example, is likely to charge substantially more for a living trust when compared to a firm in Valencia, California. Plus, some California law firms charge large fees for performing what in many cases is a relatively routine service. What kind of fees am I talking about? Well, a friend of a friend of mine just informed me that they paid over $100,000 for their estate plan at a Century City law firm. While that might be an isolated case, I know other California attorneys who commonly charge $10,000, $15,000, or more for a living trust package. Despite the fact that there is a ton of overhead to pay for when running a law practice in California, only the most complicated of family dynamics and wealth could ever possibly justify such exorbitant fees, in my opinion. Which is not to say that the consumer/client is not getting anything in return. They are indeed most of the time getting a hand-crafted personal estate plan, with the added bonus and security of a lot of hand holding, gourmet cappuccinos, and fancy estate planning binders. At the end of the day though, these clients are paying a huge price for the VIP treatment.

To make matters even more complicated though, there are plenty of California attorneys who just dabble in estate planning, along with a myriad of other areas of the law. Perhaps, these lawyers are truly skilled practitioners but as the old sayings goes: the jack of all trades, are masters of none. And with lawyers in California sometimes this is true as well.

Moreover, it's no surprise to the many trust and estates attorneys in California who do focus their practice on this area of the law that there has recently been a veritable explosion of trust litigation here. And it looks like it's only going to get worse. Putting off planning as well as shoddy planning, makes it probable that baby boomers and senior citizens will keep that end of the trusts and estates business flourishing for decades to come in California. Of course, the person(s) who did no planning or did poor planning will never know about it because they'll be gone. Naturally it will be too late at that point to make things "right." Instead, their loved ones will pay the price and be the future victims of a well intended but ill-fated plan, or lack of one.

So after having read all that, you're probably wondering what's the best way a California consumer can go about creating a competent package of estate planning and living trust documents that will protect them and their loved ones. Well here are a few suggestions that should help:

1) Look for an experienced California attorney that limits their legal practice to estate planning, probate, and elder law;

2) Know that unless you have an extremely complicated set of circumstances within your family or have a net worth above $5,000,000, most competent California living trust packages (in 2011) from experienced estate planning attorneys usually costs somewhere between $1,000 and $3,000 by the time all is said and done; and

3) By all means, ask for references from other Californians who have used that attorney's services.

The general advice directly above is the best way for Californians to go about creating a competent package of living trust estate planning documents, without overpaying for the services and while also leaving a lasting fulfilling legacy for their loved ones.

Randall Kaiden is a Los Angeles estate planning attorney. If you are located in the Los Angeles region and would like to meet him for a free initial consultation about excellent, yet affordable living trusts, visit his website at www.the-trust-store.com to make an appointment.

Also at The Trust Store, no matter where you are located in California, you are able to sit down face-to-face with an experienced estate planning attorney and create a Revocable Living Trust right from the comfort of your own living room via the internet. So if you are interested in finding out information about getting all your estate planning done for half the standard price through an innovative new online process, go to www.the-trust-store.com.

It appears that the CA DIY Trust Services usually provide reviews of their documents but only checking for spelling, grammar, and inconsistencies. Since the review is not performed by an attorney, there is no way of knowing whether the trust created is proper or if a major legal error has been committed. And actually so far I can see, since no attorney prepares any of these trusts, it is 100% CERTAIN THAT SOME (OR MANY) OF THESE TRUST PACKAGES WILL FAIL. When I say it will fail, it means that distributions will not go the way you want, assets will get wasted by spendthrift children, opportunities for creditor protection will be lost, negative tax ramifications will occur, disputes will erupt after you pass away between family members or creditors and loved ones, costly and time consuming guardianship or conservatorship proceedings will be needed, and/or many other possible negative outcomes. I also notice that there are many lawsuits against these companies FOR MISTAKES THAT HAVE BEEN MADE IN THE PAST. Please verify for yourself and do your own google search for such words as "Legal zoom complaints" to see it first hand.

Well, some attorneys answer that very question with an analysis of the above. You can find their analysis at the Practice Blawg (March, 2010). Some of the comments include:

1) A major issue that struck me was the lack of self-proved affidavit. Who wants to track down the witnesses years later if there is a will contest? Another example of how a couple hundred bucks spent now, is insurance against spending thousands later.

2) Interesting. I am an estate planner and I do think Legal Zoom has a place for drafting a very simply plan but once you go beyond the simple…I leave everything to X…and start creating a more sophisticated plan an attorney is necessary. The issues I see after a quick glance through with respect to the trust

You have created no alternate trustee if your primary one is either dead or refuses there is no provision for who takes over. Also don’t list if the trustee needs to post a bond (same with your personal representatives) because those can be waived.

Regardless of what you state in your will, most of your financial accounts like bank account, mutual funds, etc will go to whom ever is designated on the account as the benificiary. So you need to ensure that those accounts are squared with your will. It is much more complex then this but if you create a trust and fund it with an IRA and are not careful with how you structure the funding you could lose a great deal of your IRA to taxes. There are ways around this but the documents need to be careful drafted.

There is no will contest clause in the will…even if you don’t think there will be a fight…there should be one just in case

There is no spendthrift clause in either trust.

3) Debt Clause.
The second paragraph is really a tax apportionment clause. It could cause inequities if your estate were subject to tax and one child received property outside of the will in which the other child did not share. For example, if you happened to name only one child as the beneficiary on a life insurance policy, this clause would cause the other child to pay half of the tax on the insurance proceeds. Permitting the state tax apportionment statute to apply is generally more appropriate.

The last paragraph provides that the amount passing to an heir will be reduced by an amount equal to the heir’s indebtedness to you. It does not, however, provide that the debt will be discharged by such reduction.

Common Disaster Clause
This clause should presume that the wealthier spouse died first. If your spouse has greater assets in her name than you have in yours, it is correct. It may not be material, but having the wrong spouse deemed to survive may limit post mortem estate planning opportunities.

Testamentary Trust Clause
Any professional fiduciary will explain why restricting the trustee’s ability to invest in things other than bonds and income producing securities is a bad idea. It is better to give the trustee discretion and let him or her hire a professional if needed.

Separate Writing
The will does not include a provision that would allow you to direct the disposition of tangible personal property by a separate writing. Such a provision is very useful if you have items of family significance that cannot be divided or shared by your children.

Major Flaws
The major defect in this instrument, which affects a number of provisions, is that it fails to address adequately the contingencies of the death of one or both of your children or the birth or adoption of a third child. The trust provides for distribution of a child’s trust share to his “heirs” upon his death, but does not specify the allocation. If he had a spouse and a minor child, both would be “heris.” If he were survived only by his minor brother, a conservatorship may be needed because the assets would not be held in trust. How would your estate be divided if you were survived by one child and the minor children of a predeceased child? Unless you changed your will, a third child’s share would not pass in trust. These defects appear to be built into the drafting system because the provisions use individuals’ names instead of generic terms such as “descendants.”

There is no provision for changing trustees. If Sarah found the task too difficult or if she became unable to act, a court proceeding would be require to permit her resignation and to appoint a successor trustee.
If your estate were substantial, the trustee’s powers are inadequate.

The document also seems to be missing the “family calamity clause,” which would direct the disposition of your assets if the plane taking your family to its Hawaiian vacation didn’t make it.

You would be better served by investing a bit more to purchase Minnesota CLE’s manual, “Drafting Wills and Trust Agreements,” which includes numerous forms, with explanations, and provides all of the documents on a CD in Word and WordPerfect.

PLEASE VISIT THE PRACTICE BLAWG FOR MORE.

SO DESPITE THE FACT THAT MISTAKES WERE MADE IN THE ABOVE VIDEO EXAMPLE & WILL POSTING PAGE, AN ATTORNEY (INFORMED CONSUMER) HAD TROUBLE FIGURING OUT HOW TO CORRECTLY FILL OUT THE ANSWERS ON LEGALZOOM, THERE ARE NO ESTATE PLANNING ATTORNEYS TO HELP ANSWER CONSUMER QUESTIONS, AND LEGALZOOM TELLS YOU THAT THEIR FORMS ARE NOT GUARANTEED TO BE CORRECT, COMPLETE, OR UP-TO-DATE, BUT CUSTOMERS SHOULD REST ASSURED BECAUSE THEY HAVE TESTIMONIALS FROM PEOPLE WHICH DEMONSTRATE THAT PAST CLIENTS NOW HAVE "PEACE OF MIND." THE BIGGEST PROBLEM WITH THAT "PEACE OF MIND," OF COURSE, IS THAT NO ONE WILL KNOW ABOUT MISTAKES UNTIL YOU PASS AWAY AND YOUR LOVED ONES ARE FORCED TO PICK UP THE PIECES AND FIX ANY PROBLEMS OR MISTAKES THAT WERE MADE.

• You're in a second marriage (or third or fourth...)
• You have children from a prior relationship
• You own a business (or part of a business)
• Your assets total over $1,000,000
• You are recently divorced
• You have a child with special needs
• You have a disabled family member
• You have minor children and you want assets preserved for them beyond the age of 18
• You want to make charitable gifts
• You have substantial assets in an IRA, 401k, or other retirement vehicle
• You anticipate a large inheritance from someone else
• You own real estate in more than one state
• Members of your family have a history of not getting along
• People who you are thinking of putting in control of your affairs, have their own financial problems or a history of financial problems
• You are concerned about preserving your assets for yourself or loved ones, in the event you or your spouse will need long term nursing care
• You have adult children with saving or spending issues
• You are worried about your child's spouse winding up with your child's inheritance in the event of divorce
• Other Non-Plain Vanilla Circumstances Exist In Your Particular Situation