When Is Your Trust Taxable in California?

When Is Your Trust Taxable in California?

Generally, a trust is taxable in California if a fiduciary or beneficiary (other than a contingent beneficiary) is a resident of California under California Revenue and Taxation Code 17742.  This is true even if the original settlor was not a resident of California.

This means even if a non-California resident settlor creates a trust outside of California, with all non-California resident beneficiaries, the trust could still eventually be subject to taxation in California.

How does this happen?  If a trust is ongoing for a number of years, a corporate fiduciary may need to step in once there all of the successor trustees in the trust document have been exhausted.  If the corporate fiduciary who steps in is in California, the trust will be subject to tax in California.

This seems an unfortunate result.  At Mendes Weed, LLP, we participate in the Conference of California Bar Associations each year to try to enact and change legislation.  This year, we have drafted Resolution 05-07-2018 which addresses this issue of unintended California taxation of an out-of-state trust.

We advocate for our clients in every way that we can.  When our clients have legal issues that come up, and we do not believe the law properly addresses their issue, we work to change that.

At Mendes Weed, LLP, we are Federal and California Tax Lawyers.  If you have any questions about tax law, tax controversy, compliance, or appeals, we are happy to assist you.

Mendes Weed, LLP is here to help you if you have any questions.  (925) 390-3222.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

Why Won’t the Trustee Make a Distribution and Pay Me What I Am Entitled to?

Why Won’t the Trustee Make a Distribution and Pay Me What I Am Entitled to?

Pursuant to Probate Code Section 16061.7, the trustee of a trust must distribute copies of the trust to all trust beneficiaries within 60 days.  The Notice must identify: the settlor or settlors and the date of the trust instrument; the name, mailing address, and phone number of each trustee; the address and physical location of the place of trust administration; and any other information that is specified in the trust.

Why won’t the trustee distribute your money?  It could be for a variety of reasons.  For example, perhaps the trustee is not a professional and is feeling overwhelmed or does not understand the trust.  In some situations, however, the trustee may not be making a distribution because he or she did something wrong.

No matter the case, the trustee has fiduciary duties to the trust.  As a beneficiary, you are entitled to be informed by the trustee.  If you are not, you may need to take action.

It may be helpful to have a lawyer assist you in drafting a letter to the trustee.  If this does not work, you may need to file a petition in Superior Court.  The petition could simply ask for a distribution, or perhaps an accounting.  It may even be possible to surcharge the trustee for any losses of the beneficiaries.  And in some cases, there can be an award of double damages.

If you have serious concerns about the way the trustee is administering the trust, you cannot afford to allow things to get worse.

You should speak with an attorney who assists clients with trust matters.  At Mendes Weed, LLP, we assist clients with trust and estate litigation, probate, trust administration, and estate planning.

Mendes Weed, LLP is here to help you if you have any questions.  (925) 390-3222.

The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

Is an Irrevocable Trust Really Irrevocable?

Is an Irrevocable Trust Really Irrevocable?

While irrevocable trusts tend to make some grantors uneasy, as they associate an irrevocable trust with words such as irreversible, final, and unalterable, the truth is, it is possible in some instances to revoke an irrevocable trust.

Cases to Support an Irrevocable Trust

A trust and estate planning lawyer will ease your concerns about an irrevocable trust by informing you of statutory provisions that allow you to make provisions to your trust.

In the event a grantor of an irrevocable trust has gifted money to a beneficiary at a specific age, it is sometimes wise to be allowed a provision to alter that trust. If a beneficiary is showing signs that inheriting the money at the specified age could be detrimental, cause harm, or risk losing the inheritance, the grantor may be allowed to transfer that money to another trust. This provision not only protects the beneficiaries’ inheritance, but it also assures the guarantor his wishes will be respected.

In the event the trustee of a trust needs to be changed, or perhaps the terms of the trust will be frustrated if the trust continues, you may want to consider meeting with a lawyer to discuss your options.  There are many reasons that a trust may need to be revoked of modified.

For a thorough understanding of how an irrevocable trust can be used toward your benefit, it is best to contact an experienced trust and estate planning attorney with knowledge of how the laws relate to your situation.

How Can We Revoke an Irrevocable Trust?

 The first action should be to consult a lawyer with experience in trust and estate planning and specifically revoking an irrevocable trust. An attorney will help you to understand whether it allows for modification, and what circumstances it allows for a modification.

If it does not allow it, you have a few options to petition the court:

  1. Changed Circumstances: If you are the trustee and the grantor is still alive, refer to the document itself for specific instructions on revoking the trust and returning the assets to the grantor.
  1. Mutual Consent of Modification: Should the trustee and all beneficiaries unanimously agree to revoke the trust, they can file a consent modification. To learn more about a consent modification, watch this video on Modifying an Irrevocable Trust.
  1. Non-Consenting Modification: If the settlor and only some of the beneficiaries consent to a modification, the matter may be petitioned to an appropriate court where it should be demonstrated that the non-consenting beneficiary(ies) may not be impacted.

Consult Mendes Weed, LLP for Your Trust and Estate Planning Needs

 Planning for the future is an important task, and modifying an irrevocable trust needs careful consideration. While revoking a trust may grant you increased flexibility and control over some issues, it could have repercussions you were not expecting.

Be aware of any tax consequences related to modifying or revoking an irrevocable trust. It is worth the time and consideration to consult with an experienced trust and estate planning lawyer if you are thinking of revoking an irrevocable trust.

Mendes Weed, LLP has been helping clients with their trust and estate planning needs, and we would like to help you, too. We have offices in Walnut Creek, Sacramento, and San Francisco. Please contact us today.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

 

 

 

 

 

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

[Video] Modifying an Irrevocable Trust

At the Mendes Weed, LLP we aim to provide answers to some of your more sought after questions.

Our last video discussed how to modify a revocable living trust.  Today, I’m going to cover a few ways that you might be able to modify a trust that is irrevocable.  Perhaps, you need to make a distribution to a certain beneficiary, but it is not permitted; or perhaps, you would like to change the corporate trustee to an individual trustee.  There are numerous other reasons you may want to modify the irrevocable trust.  If you believe you would like to do so and you believe you have a good reason for doing so, you should meet with a lawyer who practices in this area right away.

First, you will want to review the trust document with your lawyer to find out if the trust itself allows for such a modification and in what circumstances.  If not, there are a few other options to consider.

If the settlor and all beneficiaries consent to the modification, they can likely compel a modification; or if all beneficiaries consent to the modification, they can likely comply the modification by petitioning the court.

If the settlor and only some of the beneficiaries consent to the modification, they may be able to compel a modification upon petition to a court and a showing that the non-consenting beneficiaries will not be substantially impaired by the modification.

In some cases, a trustee or beneficiary may want to petition a court to modify or terminate a trust because of changed circumstances.  If the changed circumstances were not known or anticipated by the settlor and frustrate a material purpose of the trust, the trust modification or termination may be necessary.

Remember, that it is possible that some of these changes may have an unexpected or unanticipated tax consequence, so it is important to meet with an attorney who is familiar with the relevant tax laws.

Contact our offices if you would like more information.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

[Video] Revoking a California Will or Trust

In California, a will can be revoked by a new will that specifically revokes the old one, or by destroying the will by physical act.  A physical act can include burning, tearing, canceling, obliterating or destroying the will.  This must, however, be done by the person who created the will.

A revocable living trust revocation is different.  It is governed by the terms of the trust.  For example, the trust may allow for revocation through a signed writing by the Trustor or Settlor that is delivered to the Trustee.  A trustor could also take the assets out of a trust, and the trust would cease to have control over the assets.

Revoking a will or revocable living trust is fairly straightforward, but it is important to make sure it is done in the right way.  An attorney who is knowledgeable of wills and trusts can assist you if you are considering revoking your will or trust.

Contact Mendes Weed, LLP for Advice 

If you want more information about revoking a will or trust, Mendes Weed, LLP may be able to help.  With offices in Sacramento, San Francisco, and Walnut Creek, we’ve been helping clients in the Bay Area and beyond feel confident that their future wishes are taken care of per their instructions. Contact us for more information.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

Estate Planning Tips: Sweetheart Trusts & Your Spouse’s Future

Estate Planning Tips: Sweetheart Trusts & Your Spouse’s Future

While exploring your options for estate planning, you may have heard the term Sweetheart Trust. The name has a nice ring to it, and these kinds of trusts are great for couples thinking about their own future in addition to their loved ones’ futures. Let’s take a quick look at how sweetheart trusts can work best for you, your spouse, and your loved ones.

What is Involved in a Sweetheart Trust?

The term can refer to a variety of trust structures, but Sweetheart Trusts are focused on giving the surviving spouse control over your assets upon your passing. The assets remain in the trust for the surviving spouse’s lifetime. If the surviving spouse is given Full Control, he or she can modify the trust easily without legal difficulty which sometimes includes adding or removing beneficiaries. Sweetheart Trust further stipulates that while both spouses are living, either person can revoke their shares of the trusts.

Want to learn more about estate planning? Download my free estate planning guide!

The Benefits of a Sweetheart Trust

  • A sweetheart trust makes sense if you and your spouse are aligned on your trust administration goals and you want to have a simple agreement for the administration of your assets.
  • Keeps control over how assets are distributed.
  • Allows the surviving spouse to make changes to the trust.
  • Tax benefits: One major benefit was enhanced in 2012 when the unified tax credit amount, which is the tax-free amount one can pass on, was increased to $5 million under the American Taxpayer Relief Act. For the 2016 tax year, the amount went up to $5.45 million, and for the 2017 tax year, it will be $5.49 million. The increased amount means increased peace of mind for you and your spouse.

Smart Estate Planning Means Finding the Right Attorney

Sweetheart trusts are not right for every estate planning situation. No matter what your estate planning goals are, it’s essential to find a trusted, experienced estate planning attorney. If you are looking to set up an estate plan or modify an existing plan, get in touch with Christina Weed at Mendes Weed, LLP today.

Christina Weed has worked with clients in San Francisco, the East Bay, and throughout the United States. As a licensed attorney with an LL.M. in Taxation from the University of San Diego, and a Bachelor’s Degree in Accountancy, Christina offers a unique combined focus on Trusts & EstatesTax LawTax Litigation, and Business Law. Christina is Chair of the Tax Section of the Contra Costa County Bar Association and is also a member of the Estate Planning Council Diablo Valley and the Tri-Valley Estate Planning Council.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667