couple estate planning with life insurance

What is Palliative Care? Planning for Future Medical Needs

Palliative care is often referred to as pain management or comfort care and is an option that many people choose as part of their end-of-life care plan. 

Hospice and palliative care are similar, but not the same.  Hospice care is typically provided at or near the end of a patient’s life.  However, a patient may receive palliative care at any point during an illness or after an injury, at any stage of one’s life, and not only at the end of life.

A California estate planning attorney can help you include the option of palliative care in your estate plan. Let’s discuss palliative care and planning for future medical needs. 

An Overview of Palliative Care

Palliative care seeks to improve the quality of life for people with medical conditions that cause ongoing discomfort. For example, pain management may be just one type of palliative care. The specific services a person could receive as part of palliative care will vary depending on the individual’s situation. 

While the goal of palliative care is not necessarily to try to cure the person’s illness or injury, improving a patient’s comfort and quality of life can help to restore some normalcy to the individual. Sometimes, healthcare services designed to cure or improve the individual’s medical condition can improve their comfort. For example, certain types of physical therapy can improve range of motion, strength, and mobility, which can improve a person’s quality of life.

How Palliative Care is Different from Hospice

People often use the term palliative care as a synonym for hospice, but they are not identical. Here are some of the most significant differences between hospice and palliative care:

  • Hospice generally is available only to patients whose diagnosis gives them a likelihood of living less than six months. The goal of hospice is to help the patient be as comfortable as possible during their remaining time of life. You do not need to be terminally ill to receive palliative care.
  • Hospice services do not include curative care, in other words, treatments designed to try to cure the underlying disease. While palliative care does not focus on curative treatments, palliative care does not exclude curative treatments. 

Depending on the details of the specific hospice or palliative care program, there could be additional differences between the two.

Estate Planning Can Help You Exercise Control Over Receiving Palliative Care 

Many insurance policies cover hospice care. Also, Medicaid and Medicare provide some hospice services. Palliative care is a specialty that is only recently receiving the attention it deserves, so not all insurance policies cover these services. A few Medicare plans provide some coverage for palliative care. 

People with medical conditions that cause chronic pain and discomfort might not have coverage for palliative care because they are expected to live longer than six months. Insurance might pay a portion of some palliative care services or prescription drugs, but comprehensive coverage of palliative care has not yet arrived for most people. It can be a challenge to have an acceptable quality of life in this situation.

In addition to standard estate planning documents like a will or a living trust, you might want to consider having your lawyer draft a durable power of attorney that authorizes the person you name as your attorney-in-fact in your power of attorney to obtain palliative care if you are unable to communicate that wish for yourself at some point in the future. Your California estate planning attorney may be able to help you to choose an insurance plan that provides palliative care, to make a financial plan for palliative care, and to engage in Medicaid planning that could help you qualify for benefits to help pay for your medical care. Contact our office today for legal help. We offer a free consultation.

Man signing estate plan document for his business

Estate Planning Guidance for Small Business Owners

Small business owners must often incorporate their estate plan with a business succession plan. Having an estate plan ensures that your wishes for your business are carried out after your death. Whether you want to pass the business to another person or liquidate the business, our California estate planning attorney can help you identify your goals and draft an estate plan that meets those goals.

Deciding What Happens to the Business After Your Death

The first step is to decide what you want to do with your business after your death. If you are a sole proprietor, you can choose to either pass the business to another person or to close and liquidate the business upon your death. However, if you have partners or co-owners, they may not want to shut the business down after your death.

Your business operating agreement and the documents filed to create your business should address what happens to your interest in the company upon your death. In some cases, you may pass your interest to your heirs. However, the corporate documents might dictate that the co-owners or the company may purchase your interest in the business from your estate.

A buy-sell agreement is one way to handle your interest in the business upon your death or disability. The buy-sell agreement allows co-owners to purchase your interest in the business. The proceeds from the sale pass through your estate according to the terms of your Will.

However, if you intend to leave your business to your family or other heirs, you will need a business succession plan. A business succession plan designates a person or persons to take over your business after your death or if you become incapacitated. The plan is a detailed roadmap for preparing family members or others to take over the company and address other legal matters.

Considering Tax Consequences for Your Estate and Family

Another critical component of estate planning for small business owners is tax planning. You do not want your estate or heirs to be burdened with estate and gift taxes after your death. An estate plan can help you reduce or eliminate taxes. You might want to consider using a trust to hold your interest in the business. 

The assets of a trust pass to the trust beneficiaries outside of probate. Depending on your situation, you could create a trust that continues after your death. An estate attorney can help you explore the various options for protecting business assets before and after your death. 

Consider Purchasing Additional Life Insurance Coverage 

Life insurance is an essential consideration for anyone. However, a small business owner needs to consider whether the business can support their family after their death. If you are the key person that operates your business, the company may not generate enough income without you to support your family. 

Purchasing additional life insurance coverage can provide your family with immediate resources to pay living expenses after your death. The insurance proceeds can bridge the gap between your death and finalizing the business transfer. 

Contact Our California Estate Planning Attorney for a Free Consultation 

Estate planning is important for everyone, but especially for small business owners. An estate plan ensures that the business you created can continue to provide for your loved ones after your death. Protecting your business assets preserves your legacy for future generations. Contact our office to schedule a consultation with an experienced California estate planning attorney.

Clients sitting with estate planning attorneys

How to Create an Estate Plan Suited for Unmarried Partners

Under California law, domestic partners have all of the same rights as a married couple.  However, if you and your partner are not married, and not registered as domestic partners, you will need to be especially careful that your estate plan is in place to carry out your wishes when you die, or if you become incapacitated.  

A California estate planning attorney can explain how to create an estate plan suited for unmarried partners and draft the documents you need.   

Unless you are married to your partner, or registered as a domestic partner with the State of California, you may find that California law considers you and your unmarried partner to be “legal strangers” for purposes of estate administration. No matter how deeply you care for your partner, if you and your partner are not married, and not registered as domestic partners with the State of California, the only way your unmarried partner can receive any of your assets or other protections is if you make that happen. The law will not do that for you.

Wills and Trusts for Unmarried Partners

If you do not have a will or living trust, your unmarried partner will not receive anything from your estate when you die. People who do not leave a will or trust behind die intestate, which means that California intestacy laws will control how their assets get distributed. An intestate estate goes only to your blood relatives and surviving spouse or domestic partner if you have one.

You will need to create a will or trust for your unmarried partner to inherit from you. Either one can work for this purpose. One consideration in choosing between a will and a trust is privacy. A will must be filed with the probate court after you die, so it becomes a public record. A trust does not usually get filed in court, so you have greater privacy concerning the distribution of your assets.

An important thing to note is that if you were married to someone other than your current partner and you separated from your legal spouse but did not finalize the divorce, your legal spouse will have a claim on your estate whether you die intestate or with a will or trust. You should discuss this issue with your estate planning lawyer if you are in this situation.

Powers of Attorney for Financial Matters and Healthcare Decisions

You will want to make a Durable Power of Attorney that gives your unmarried partner the legal authority to manage your financial matters if you become incapacitated if that is the person you select for that function. Otherwise, your partner would have to get a court order, which your family might contest.

You can name your unmarried partner as your medical decision-maker if you become unable to do so for yourself. You will want to include a medical records authorization and written instructions for your healthcare providers that allow your partner free access to visit you in the hospital or long-term care facility. Some families have blocked a partner from seeing the other partner in the hospital because the relative did not approve of the person’s lifestyle choices.

Beneficiary Designations

It can be useful to make a list of all your financial accounts and review the beneficiary designations. In a committed relationship, you might want to make your unmarried partner the beneficiary of your life insurance and retirement accounts. Bank and investment accounts can transfer automatically upon your passing by adding transfer on death (TOD) or pay on death (POD) instructions to the accounts. Your financial institution can provide the forms for this account change. A California estate planning attorney can craft an estate plan for unmarried partners to help you meet your goals and needs. Get in touch with our office today for a free consultation.

Older woman working with estate planning attorney

Estate Planning for Surviving a Spouse or Partner

For many of us, it may be even more difficult to think about the loss of a spouse or partner than it is to face our own mortality. 

However, you still need to do estate planning for surviving your spouse or partner, because one of you will most likely predecease the other. If you are the survivor, your loved one would want you to be safe and secure when he or she is not there with you.

While the details will depend on the facts of your unique situation, there are some overarching concepts that may apply to most couples. A California estate planning attorney can guide you through an evaluation of the legal protections available and draft your documents for you. 

Consider the Children

If you have minor children, you need to prepare for the worst-case scenario and ensure they will be cared for if you and your spouse or partner meet an untimely end. 

The two primary concerns for your children are deciding (1) who will manage their money when you’re gone, and (2) who will take care of the children on a daily basis. 

For their money, you can set up a trust and name a trustee to manage the assets until the children become adults. The more challenging question may be deciding who will be the guardian of the children if you both die. This choice could change over the years because people and situations evolve.

Know Your Spouse or Partner’s Wishes About End-of-Life Medical Care and Funeral Arrangements

Anyone who has gone through the experience of having to make end-of-life choices for a close relative understands the soul-searching and angst that may accompany those decisions. It is much easier to navigate those emotion-filled times if you already had these conversations and made these decisions before the unthinkable happens. 

When you know the answers, you can take comfort in knowing that you are merely carrying out your spouse or partner’s wishes rather than having to figure out or decide what should happen. Also, you should find out what kind of funeral and burial arrangements your spouse or partner would like. The answers might surprise you.

Review Your Assets with Your Estate Planning Lawyer

Along with discussing the above issues, you and your spouse or partner should sit down with your estate planning attorney and go over your list of all assets that you each own.  One of the best gifts that you can give to your spouse or partner when you die is to have all of your assets in order ahead of time.   

You will want to make sure that your retirement accounts, investments, real property, vehicles, and other assets have up-to-date beneficiary designations and a clean title that does not conflict with your estate planning instruments. You don’t want to leave a mess to clean up after you die for the administrator of your trust or estate. 

Don’t forget about any life insurance policies.  You’ll want to be sure that the named beneficiaries are consistent with your wishes, and with any estate planning documents that may mention those policies.  Finally, be sure to have your California estate planning attorney draft all the documents to protect you and your spouse or partner, as well as your other loved ones. A durable power of attorney, living trust, medical power of attorney, and medical records authorization are a few of the documents that can provide the legal framework for the family if you or your spouse or partner become incapacitated or predecease the other. For legal assistance with your estate planning contact our office today.

Older woman signing legal document

Elder Abuse and Fraud: How to Avoid Being a Target

Con artists love to go after seniors to try to trick them out of their hard-earned money. Sometimes the scammers are total strangers from somewhere else in the world, and sometimes the thieves are close to home. Relatives, neighbors, caregivers, and trusted people like spiritual advisors may dupe older Americans out of the money they need to survive.                                                       

There are ways to protect yourself from these crooks. A California estate planning attorney can explain how to avoid being a target and can provide guidance on setting up ways to keep your money out of the hands of con artists.

Educate Yourself on the Current Common Scams

When you know what to look for, it is easier to spot fraud before falling victim to it. Here are some of the top scams that target seniors:

  • Getting and misusing your Medicare identification number.
  • Selling counterfeit prescription drugs to seniors that could be useless or even dangerous.
  • Funeral scams like selling caskets to the surviving spouse of someone who will be cremated. On a related note, con artists read the obituaries and demand the grieving survivors pay a nonexistent debt.
  • Selling fake anti-aging products and claiming they are as good as legitimate products, like Botox.
  • Calling seniors on the phone and tricking them into sending money after a natural disaster by pretending to be a charity, or claiming that a relative is stranded and injured in another country. 
  • Sending emails to seniors to get their bank account and credit card information or to download fake antivirus software that gives the thieves access to the older adult’s computer and personal information.
  • Con artists who pretend to be financial advisors to get access to the senior’s accounts and then disappear with the money.

These are just a few examples of the many schemes people use to prey upon seniors and try to steal their life savings.

Do Not Be Afraid or Embarrassed About Reaching Out for Help or Advice

Many people suspect that something might be fishy, but they are embarrassed to ask anyone about their concerns, particularly if the senior already got scammed out of some money. Sometimes, seniors get ripped off by their own family members who threaten them with getting thrown out into the street if they tell anyone.

Criminals prey on these emotions, fear, and embarrassment, to get away with stealing money from older adults. Your local law enforcement is a great resource for help if you suspect that something is too good to be true or if you are having to hand over your money to others against your will.

Have a “Buddy” System

What might sound legitimate to one person could set off alarm bells for another. Set up a buddy system with a trusted friend or relative who will look over your shoulder in exchange for you doing the same for them.

Stay Active and Involved in Your Community

When someone becomes isolated from their community, they are a natural target of fraudsters. Staying active and involved in your community gives you a valuable resource to evaluate would-be con artists because you can ask others about the reputation of those who might try to scam you. A California estate planning attorney can answer your questions and help you set up legal protections for your assets. Get in touch with our office today; we offer a free consultation.

Couple looking at estate plan

How to Protect an Inheritance from Divorce, Creditors, and Lawsuits

After working hard and saving for a lifetime, you will want to leave an inheritance to your loved ones without having to worry about some third party taking that money. 

Unfortunately, many people see a sizable inheritance as a reason to try to take what they can get from your heirs. Receiving the bounty of your hard work may make your children vulnerable to financial predators.

There are things that you can do while still alive to protect your heirs from gold-diggers and opportunists. A California estate planning attorney can explain how to protect an inheritance from divorce, creditors, and lawsuits.

Responsible Adults Doing the Right Things

We often hear about people wanting to set up a spendthrift trust to protect a child who does not manage money well or a similar arrangement for a loved one with special needs, mental health challenges, or addiction issues. One does not often think about protecting adult children who work hard and handle their finances responsibly.  But even responsible adults may face circumstances that jeopardize their inheritance.

If your child receives assets directly from your estate, they could lose much of that money one day through no fault of their own. Here are a few examples of common scenarios in which this may happen: 

  • Your child could marry someone who sees the inheritance as a financial opportunity. People have been marrying for money as long as there has been a concept of money. For example, if your child uses inherited funds to buy jointly-titled assets like a marital home, your child may unintentionally gift half of that inheritance money to their spouse. The spouse could file for divorce and walk away with half or even more.
  • Your child could be cheated by a business partner. If your child starts a business with inherited funds, a business partner could siphon off money from the company and even disappear with the embezzled funds. Your child may be left with massive debts and no way to pay them. Your child may file for bankruptcy, but the bankruptcy trustee may then take the remaining inheritance money and use it to pay the business debts.
  • California has unusual laws about liability. Let’s say that someone else causes a multi-car accident, hitting your child and several other vehicles. If the at-fault driver does not have enough insurance coverage or money to pay for the severe injuries from the collision, your child could end up getting sued along with the negligent driver. It is possible for a judge to assess one percent of the fault to your child and order your child to pay the unpaid damages out of inherited funds even though your child did not cause the crash.

Every single one of these scenarios could possibly be prevented by an effective estate plan.

Spendthrift and Inheritance Protection Trusts and IRA Legacy Trusts

If you set up your living trust to include language that creates a Spendthrift Trust, also known as an Inheritance Protection Trust, gold diggers and opportunists may be unable to get their hands on your child’s inheritance. In a nutshell, these special trusts work by letting your child control and use the inherited assets but not own them. Some or all of the funds may remain in the trust until the child reaches a certain age, or even for the child’s entire life.  The trust may also provide that shares of the trust may be distributed to the child when he or she reaches certain ages.  So long as the assets remain in the trust, no one can take away from your children what they do not own. Your child would get all of the benefits of the inheritance without the risk of loss to others. If you already have a living trust without these terms, you could execute an amendment or restatement to add inheritance protection trust provisions to your living trust.

If you have a retirement account that needs protection in a similar manner, you may execute an IRA Legacy Trust. Retirement accounts no longer have the protection from creditors that they used to enjoy, but an IRA Legacy Trust can fix that issue, just as a spendthrift or inheritance protection trust may protect non-IRA assets.

Living trusts should not be DIY projects.  If you make a mistake on these sophisticated legal documents, your child could lose all of the protections you intend to create. A California estate planning attorney can draft the documents you need to protect an inheritance from divorce, creditors, and lawsuits. Contact our office today for a free consultation.

Older man looking over his estate plan

How Does Prop 19 Affect My Estate?

Changes in probate and estate laws can have a significant impact on your estate plans. However, changes in tax laws can also positively or negatively impact your estate. Therefore, we strongly recommend periodically discussing your estate plan with our California estate planning attorney, especially after changes in tax laws such as California’s Proposition 19.

Before discussing how Prop 19 can impact your estate plan, it helps to understand how the state of California taxes real estate.

California Real Estate Taxes 

California collects a yearly property tax calculated based on one percent of the assessed sale price of the property. Counties can increase property taxes each year to account for inflation. The limit for yearly inflation increases is two percent.

Adding improvements to real estate may trigger a property tax reassessment. The county reassesses the taxes based on the date you complete the improvements. 

The most common way the county increases property taxes is by reassessing the value of real estate when it is transferred by sale, death, or gifting. 

For more than forty years, an important exclusion to this method of increasing real estate taxes has been through exemptions for transfers of real estate between spouses, from parents to children, from grandparents to grandchildren, or for individuals over 55 years old buying a home.

What is California Proposition 19?

California Proposition 19 is also better known as Prop 19. California voters approved the ballot measure by over 51 percent in November 2020. The measure limits the exemptions for parent-to-child and grandparent-to-child transfers to generate additional county revenue, with some of it dedicated to wildfire relief. 

Beginning on February 16, 2021, the exceptions from reassessments for real estate transfers to children from parents and grandparents, and the increases in property tax amounts that often accompany reassessments, became much more limited. Prop 19 resulted in the following changes:

  • Property used as vacation rentals or investment property is no longer subject to the exclusion. The county reassesses these properties for property tax purposes even when the property is transferred to a grandchild or a child.
  • The county conducts a partial reassessment when the property value increases by more than $1 million. Beginning 2023, the $1 million threshold increases yearly based on inflation. 

There are still exclusions for transfers to children or grandchildren who intend to use the home as a primary residence. However, the exclusion only applies to property under the $1 million threshold. 

How Can Estate Planning Help Avoid Property Tax Reassessments?

Estate planning offers several potential solutions to this new problem. First, an estate attorney may review your entire estate plan to determine the best ways to protect all assets from taxes and assessments. 

Creating an irrevocable trust could be a possible solution to avoid Prop 19 taxes. Transferring the real estate to an irrevocable trust may help avoid Prop 19 issues and may also preserve your step-up basis for capital gains tax benefits. However, the disadvantage of an irrevocable trust is that you lose control over the property. For these reasons, it is best to discuss all options with an experienced California estate planning lawyer to ensure you design a plan that addresses all issues in the best possible manner. 

Contact Our California Estate Planning Attorney for More Information 

Many factors could affect your estate plan. Discussing your goals and needs with our California estate planning attorney identifies the issues to address now so that you can provide for your family and protect your legacy for future generations. Contact our office today for a free consultation.

Woman taking care of elderly loved one

When Do I Start Paying My Deceased Loved One’s Creditors?

The debts of a deceased person can wipe out the inheritance a beneficiary might have expected to receive. California has its own rules about the notification of creditors and payment of creditor claims when administering an estate. If you are trying to handle the estate of a close friend or relative, you probably have many questions, like “When do I start paying my deceased loved one’s creditors?” 

A California estate planning attorney can answer your questions and help you administer the estate. Being named as the executor of a will, the trustee of a living trust, or the administrator of an estate, does not mean that you have to perform those tasks without professional help.

Step One is to Find Out All the Debts Your Loved One Had

California law requires that you promptly notify all the known creditors of the deceased person that the person died. You do not want to make the mistake of assuming that a person’s debts die with them. The estate will have to pay valid debts. You cannot distribute money to the heirs before dealing with the debts.

After you notify the decedent’s creditors, they will have 60 days to file a claim against the estate. The estate representative will then review each claim and either approve or dispute the individual creditor claims.

What Happens if the Estate Does Not Have Enough Money to Pay All the Valid Debts of the Decedent?

Usually, creditors cannot hound the relatives of a deceased person to pay the decedent’s debts. In California, however, there are two exceptions to this general rule: 

  1. Joint debt accounts. If you were a cosigner on a loan with the decedent, you will have to continue making payments after your loved one dies. It does not matter if you ever owned the asset. Also, if the deceased person added your name to a joint account, like a credit card that had an outstanding balance, you might have to pay off that debt out of your assets if the estate lacks sufficient funds to do so.
  2. Some jointly held assets. California is a community property state. If the estate cannot pay off all the valid debts of your loved one, the surviving spouse might have to pay the debt on community property.

This is merely a quick overview of what you might face if the estate does not have sufficient assets to satisfy all debts of the decedent.

Who Gets Paid First?

California probate law categorizes creditors by the level of priority. You cannot distribute money or other assets to the heirs until you satisfy all the valid debts of the decedent.

Here are the seven categories of creditors, starting with the top priority (who must get paid first):

  1. The costs and administrative expenses to administer the estate.
  2. All secured debts, liens, and deeds of trusts.
  3. Funeral expenses.
  4. Medical bills from the last illness that led to the death.
  5. A reasonable sum for the surviving spouse or children who were not intentionally disinherited. This amount is called the family allowance, and must generally be approved by a court.
  6. Wage claims of employees or contractors of the decedent, within limitations.
  7. Any other valid debts that do not fall into categories one through six.

You may be looking for ways to protect an estate from being depleted by creditor claims. You may also be faced with frivolous claims filed by parties hoping to receive a nuisance settlement. A California estate planning attorney can help you with these situations, and many more, and explain strategies that might be beneficial to protect the estate and to protect you from liability. Get in touch with our office today.

couple and attorney discussing estate plan

20 Estate Planning Legal Terms You Need to Know

Having a complete and comprehensive estate plan is the most effective thing you can do to protect your family as a whole, and ultimately your legacy. But estate planning in California is known for being incredibly complicated and confusing if you aren’t a California estate planning attorney.

The first step to making it less intimidating is to have a more thorough understanding of it. To start, understanding some of the essential terminology and vocabulary involved in estate planning is essential. Here are the terms you should know to better understand your estate planning options.

Advanced Healthcare Directive

Also known as a living will, a healthcare directive ensures your wishes for treatment or interventions are followed in the event of your incapacitation.

Assets

Assets are, generally speaking, anything that someone owns. This includes homes, investments, bank accounts, insurance policies, art, jewelry, and other physical possessions.

Beneficiary

A person, charity, or other entity that is named as a recipient of some portion of the decedent’s assets.

Codicil

This is any change, or amendment, to a will. It will explain, change, or revoke portions of a previously established document like a will.

Decedent

The decedent is the person that passes away, and whose assets or estate are being distributed.

Distribution

Any payment via cash or assets to a beneficiary or other entitled party.

Durable Power Of Attorney

This is a document that grants another party, person, or institution decision-making power on your behalf in the event of incapacitation.

Estate Settlement

The process of valuation, payments, distributions, and other final affairs following someone’s death.

Incapacitation and Incompetence

The state of being unable, either physically or mentally, to manage one’s own affairs. This can be a temporary or permanent condition.  

Inheritance

Assets a beneficiary receives from a decedent.

Intestate

If someone dies without a will or any estate planning measures, they are said to be intestate. Intestate situations often require court intervention.

Joint Tenancy

Co-ownership in a property allows the property to pass to the survivor automatically.

Probate

The overarching process of validating a will and settling an estate.

Revocable & Irrevocable

Important terms that dictate whether or not documents related to a trust can be changed.

Testator

The owner of the estate and assets, and the maker of the will.

Transfer On Death / Pay On Death

Accounts that are set up specifically to pass to named beneficiaries upon the passing of the account owner.

Trust

A legal document that allows the management of assets on the behalf of one or more beneficiaries

Trustee

The person or entity that administers the terms of the trust for the named beneficiaries.

Trustor or Settlor

The person that creates and sets up the trust for the beneficiaries, and who will eventually become the decedent.

Will

The will is the legal document that lays out all of the details for the distribution of assets and guardianship of minor children following death and is considered the most basic element of estate planning.

Let Experts Handle the Details

Reach out today to our office with any questions, or for more information about starting your estate planning documents.

estate planning attorney helping woman to create a charitable trust

Four Things to Know About Charitable Trusts

A charitable trust can provide advantages for you, your heirs and beneficiaries, and to one or more charitable organizations that you name in the trust. You have options about which kind of trust you want to create, depending on your objectives.

Charitable trusts can come with tax incentives and other financial benefits. A California elder law attorney can review your situation and offer guidance about which type of charitable trust may be the best fit for you. Here are four things to know about a charitable trust:

1. Your Charitable Trust Must Comply with the IRS Rules

Charitable trusts often involve a “split interest” in the trust assets. This means, for example, that a charity may receive the income or a limited percentage from the trust assets for a certain period, with the remaining funds paid to other beneficiaries after that period expires, i.e., a “charitable lead trust.”   

Alternatively, you may choose a non-charitable beneficiary or beneficiaries to receive the income or a percentage from the trust for a certain period, such as the lifetime of those beneficiaries or a set number of years, with the charity receiving the remainder of the assets after that period expires, i.e., a “charitable remainder trust.”

Whether you select a charitable lead trust or a charitable remainder trust, your estate planning device must meet all the requirements of the Internal Revenue Service (IRS) to work correctly. A poorly-drafted trust instrument may not provide the intended tax savings.

2. Charitable Trusts Are Irrevocable

Similar to other tax-advantaged trusts, charitable trusts cannot be changed after you create and fund them. You may not be able to substitute a different charitable organization for the original one, even if you no longer agree with the goals or management of that organization. No matter how much it galls you, the trust may have to stand as is. 

You could set up a donor-advised fund for your charitable trust to avoid that problem. With this arrangement, you will have some flexibility about which charities receive the assets. You do not have to commit to any specific charitable organization at the time that you create the trust.  However, you will only receive tax benefits for gifts to charities approved by the IRS.

Also, the IRS may not care if you suffer a medical or financial crisis and suddenly need to take any of the assets out of the charitable trust. Once assets are retitled into the name of the trust, you cannot change your mind and take them back, unless you or your heirs can persuade a court to modify the trust based on changed circumstances that could not reasonably be foreseen.

3. How Charitable Lead Trusts Work

With this type of charitable trust, you will get a charitable donation tax deduction equal to the amount the charitable trust distributes to the designated charity each year. The charitable lead beneficiary will continue to receive these distributions for a certain period of years.  At the end of that period, the trust will distribute the rest of the principal to other non-charitable beneficiaries you select.

4. Charitable Remainder Trusts Can Provide Income During Your Lifetime

A charitable remainder trust pays you or your chosen non-charitable beneficiaries an income from the trust assets for a certain period of years, or for the lifetime of one or more of those beneficiaries.  The IRS gives you a tax deduction for the rest of the assets – the charitable remainder –  that you designate to go to a charitable organization after your life ends or the time period expires. At that point, the trust will distribute the remainder of the assets to the charitable organization.
These estate planning tools are sophisticated, so be sure to get good advice. A California elder law attorney can help you set up a charitable trust that can meet your needs and goals. Call our office today to schedule a consultation.