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Elderlaw: 11/01/2015

Elder Law

Dear Len & Rosie,
My elderly mother recently passed. I am trustee and only beneficiary of her trust. I have a sister, whom I have not seen or heard from in 40 years when she said she hated all of us and never wanted anything to do with us again. She even gave up her five-year-old son for strangers to adopt and would not let my parents adopt him. In the last few years she has visited my mother a few times a year. Now she has retained a lawyer to challenge the trust. Her court petition states that my mother was insane and that I committed elder abuse by forcing her into making this trust, but my mother left her out of the trust because of what she did in regards to their only grandchild and how she treated her and my father.


Dear Bobbie,
Your sister is trying to throw out the trust so your mother’s estate will pass equally between the two of you. To succeed, she has to invalidate not only the trust, but also whatever prior wills your mother may have signed disinheriting your sister and leaving everything to you.

Does your sister have a case? The attorney representing her probably thinks so. Most lawyers take on will and trust contests on contingency where the lawyer won’t get paid unless there’s a favorable judgment or settlement. But there are lawyers out there who use will and trusts contests as a means of legalized extortion. Even though your sister may not have a case with much merit – she was estranged for decades after all – it may cost you a lot of money to defend your mother’s estate plan. The lawyer could be hoping that he or she can convince you to pay off your sister with $20,000 or $50,000, just to make her go away.

Whether or not your mother’s trust is valid depends on the circumstances surrounding the creation of the trust. Here’s the best case scenario: Your mother, years ago when she was living independently, went to see the lawyer all by herself and you had nothing at all to do with the creation of the trust and you didn’t even know about it until it was a done deal.

On the other hand, your sister would have a much better claim if your mother created the trust only after she became dependent on you for help in writing her checks and conducting her business. Then you picked the lawyer, booked the appointment, drove your mother there and explained to the lawyer how bad your sister was. Your mother’s trust will be even more difficult to defend if she signed it after she had been diagnosed with dementia or moved into an assisted living facility.

The lesson here is that it’s never too early to disinherit your children. What we mean by saying this is that if you are going to create an estate plan someone may feel as being unfair, it’s best to do it now, while you live independently, and without any assistance from the people who will benefit from you disinheriting someone else. It’s also best to hire an attorney to prepare your estate plan, because your attorney can then be a neutral unbiased witness to testify that you really knew what you were doing.

Len & Rosie

Dear Readers,

Many people think that once they’ve created a trust, their estate plan is complete and they can sit back and relax. This isn’t so. In order for your trust to work the way it was designed, you have to fund the trust with your assets. Usually, we do the heavy lifting regarding transferring your home and other real properties into your trust. We prepare deeds for our clients’ California real properties, and we advise clients on how to get their out-of-state real properties into their trusts.

What we don’t do, and what we can’t do in a manner that is practical and affordable to our clients, is to transfer your accounts into the trust. Each financial institution has its own forms and procedures, and they won’t talk to us anyway. We can’t walk into the bank and tell them to transfer your Certificates of Deposit into the trust because our names are not on your account. It’s your account, so you’re the one who has to do it. We do, of course, provide clients with a Certification of Trust to facilitate this, and trusts have been around for a while, so you’ll never walk into any financial institution in the United States that doesn’t know how to help you when you want to fund your trust.

If you are helping out your parents or other family members with their trusts, an account is in the trust if the statement says something like “Joe Smith, Trustee Joe Smith Trust u/t/d 10/08/2015.”

What happens if you don’t fund your trust before you die? That depends on how the unfunded assets are titled. Accounts may pass to joint tenants or pay-on-death beneficiaries, or they may be a part of your probate estate. If you die and your probate estate is worth under $150,000, then it’s not too complicated – your heirs can collect the account directly using a Small Estate Declaration. But if your probate estate is worth more $150,000 or more, then your estate is usually subject to probate in the courts even though you spent all that money on lawyer fees creating a trust.

What goes into your trust? As a rule, everything, with three exceptions.

  1. Keep your checking account out of the trust, and eventually add a trusted family member to the account so that he or she can immediately write checks to pay your bills in the event of your death or incapacity. 
  2. Retirement Accounts can’t go into a trust when you are alive without you cashing them in and paying all that income tax at once. Do make sure that you have named the right people as retirement account beneficiaries, and never name a trust as beneficiary unless you are advised specifically to do so. 
  3. Automobiles, mobile homes and boats registered with the DMV or the Department of Housing don’t need to be in a trust, because their value doesn’t count against the $150,000 amount that triggers probate administration in the courts. 
The bottom line – make sure your trust is funded with your assets and if you’re not sure about how to do it, ask. If you get the job done it will make things easier for everyone when you’re gone. 
Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at Len also answers legal questions each weekday, Noon-1 p.m. and Sundays, 4-7 p.m. on KGO Radio 810 AM.

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