Published in the Hokubei Mainichi, Sep. 6, 2008
Estate planning paperwork isn’t as dry as it looks. It has a lot in common with the kind of fairy tale where a hero has a magical key devised to open doors to the treasury.
Think of yourself as having the ability to deliver an extraordinary set of keys to unlock treasure. An estate planner’s work is to make keys that will smoothly open the right doors to ease the inheritance process.
If estate planning is a process of fitting keys to doors, trust administration is helping the next hero in a family’s continuing saga to brush away the vines from those doors and use the proper keys to unlock the inheritance. Trust administration also means clearing the path to carry the treasury contents home, often using other keys that were created when the trust was made.
This is the second in a series of articles in the Hokubei on trust administration. The first, on Aug. 1, 2008, introduced some of the legal procedures required in California at the death of a settlor (the creator of a trust). My next few articles will concentrate on trust administration issues for married couples.
As you may know, trusts are written differently for married couples than for single people to reflect the federal tax protections for inheritance within a marriage.
I’ll start by updating a series I wrote for the Hokubei in 2003 summarizing federal tax considerations and other ins and outs of trusts for married people. In later articles, I’ll explain how the special trust provisions for married couples lead to a new phase in the life of the trust after the first spouse passes away, and how trust administration helps the trust, trustees, and beneficiaries to assume their new roles correctly.
I’ve been doing estate planning work for a long time, so I know how easy it is to think that once you have estate planning documents, you’re all set. That’s only partially true. The documents that you had prepared 10 or 20 years ago may serve certain functions but may neglect others. Unlike the rules of storybook magic, tax laws have a tendency to change.
Certain estate planning documents, or sections within documents, are like magic keys – not necessarily all to the same treasury. Some unlock tax advantages, others allow for ease of administration.
For instance, for married couples, if you have the “disclaimer trust” key, the surviving spouse may be able to keep the assets in one simple trust after one spouse passes away rather than having the assets of the couple split into two halves. The surviving spouse may thus be able to avoid the extra duties of filing two separate tax returns and becoming a fiduciary for the heirs of the first spouse to pass away. I’ll explain more along these lines soon in the next few articles.
If a married couple grant each other “community property” keys, then the surviving spouse will have a significant capital gains tax advantage when the first spouse to die passes away.
The list goes on. The right keys unlock useful possibilities. Revising your estate planning documents is small investment of time and money, but it can lead to tremendous advantages.
The Law Offices of Laurie Shigekuni
San Francisco Office
2555 Ocean Avenue
San Francisco, CA 94132