Brianna Giliberto Hermann, a California attorney with extensive experience in asset protection and end-of-life planning, has been our guest. She shares essential information about trusts and how they can be used to protect one’s wishes. She also discusses the best way to select successor trustees based on her personal experience with navigating inheritance disputes.
A’revocable trust is often used for estate planning of individuals with assets (referred to collectively as a person’s ‘estate’) that exceed $184,200 in California. Commonly, a revocable trust can also be called a living trust or a family trust. This document has the advantage of being able to be modified at any time during the life of the person(s) creating it (referred as the “settlor” or “trustor”), provided they are mentally competent.
Common misconception is that a revocable Trust will shield you from any legal liability in the event you are sued. A revocable trust is not separate from the person who created it. This trust can be modified at any time and doesn’t have fixed assets. The similarly-named ‘irrevocable’ trust can protect you from some legal liabilities, but the disadvantage is that it is not considered separate entity.
A revocable trust, on the other hand allows an individual to make a probate-law-based instruction manual that outlines their wishes for the people who are left behind about what happens to their estate after they die. In that it includes one’s wishes for the after-life, it is very similar to a “last will”. It avoids the lengthy and expensive court process of probate, which is what a last will does. The typical simple probate case lasts between 12-18 months. It involves the court overseeing all aspects of the process, from the appointment of the estate representative to the approval of the final distribution.
A revocable trust is the only way to avoid probate and ensure your wishes are respected, and not what the law requires. This applies to homeowners and anyone with assets valued at $184,000.
Although people want to save money on trusts, it can be a long-term investment which could help your family save thousands of dollars in legal and court fees. California Probate Code Section 10810 states that attorney fees are to be paid for probate. The percentages include 4% of the initial $100,000, 3% of next $100,000, 2% of next $800,000., 1% of next $9,000,000, and 0.5% on the next $15,000,000. The attorney will receive $14,000. This is for a $550,000 estate, regardless of any outstanding mortgages or debts.
A revocable trust is the only way to avoid probate and ensure your wishes are respected – not what the law requires.
Although they can be more successful than trusts in avoiding probate, there are still other options. You could be a joint tenant, have beneficiaries named on ‘payable on death’ accounts or a transfer on death deed. Each of these methods has its own risks that you would not want to avoid.
A joint tenancy is when two names appear on the title. There is also a right to survivorship, where property automatically passes to the survivor. A right of survivorship can be problematic if both the survivor or the deceased pass away. If no one on the title has a right to survivorship, the asset (more likely a house), will need to be probated.
Another way is to list beneficiaries directly on money account such as stock accounts, annuities and life insurance. These accounts are known as “payable on death” because the assets of the account pass to the beneficiaries as described in California Probate Code Section 532.
Payable upon death accounts have a high chance of the asset being blocked to the beneficiary you want. The account is only available to the named beneficiaries. If you have two of your children listed on your 401K as equal beneficiaries, but one of them predecesses you, your grandchild will be left behind. Your grandchild will not receive anything if you don’t add them as beneficiaries to your 401K. You can make this asset a trust so it follows a whole family of beneficiaries. This will ensure that your grandchild isn’t left out.
California law allows residential property to be transferred on death. If the TOD deed is recorded within 60 days, you can designate who will receive the property after the death of the original owner.
Although there are other ways to avoid probate than through a trust, they can be just as unsuccessful as the trust.
A TOD deed can be revocable but it is not enforceable. This is especially true for doomsday scenarios that are difficult to avoid with trusts. The TOD deed may not be recorded with the county within the statutory deadline. If the beneficiary dies before the original owner, the TOD will be legally invalid. Property could pass to the person determined by probate court as the rightful heir according to California Probate Code Section 240. If the property owner is unable to sign the deed due to dementia, stroke, coma, or other medical events, then there may not be any way to cancel it.
ToD deeds do not work well for minor children. While minors can own real property, they cannot make or transfer contracts relating to real estate under California Family Code Section 6701 or California Civil Code Section 1556. This is why it’s better to create a trust than make a TOD deed.
It is important to prepare for all possible scenarios and to place any large-value assets into a trust. This is particularly true for California homeowners, even those just starting out. You can place your money accounts, including any savings accounts, larger checking account, IRAs and 401Ks, as well as life insurance policies, annuities, and even life insurance policies, into a revocable trust. You can make any changes to the beneficiary of any asset by placing your money accounts (any savings accounts, larger checking accounts, IRAs, 401Ks, life insurance policies, annuities, etc.) into a revocable Trust. It is possible to keep complete control of your assets and create a treasure map that will allow you to distribute your estate’s proceeds.
The most important decision you make as the trustee is who will succeed you. If you become incapacitated or die, the successor trustee will take over the trust. Name a successor trustee to make sure that your instructions manual, which is your revocable trust, is followed to the letter. The trustee is responsible for managing and protecting trust property in the best interests of the beneficiaries (also known as the beneficiaries). It is therefore crucial that you are able to trust the successor trustee you have named.
It is wise to plan ahead for all possible scenarios and to place any large-value assets into a trust.
Most revocable trusts include a reference to the general powers and duties of trustees that are required to fulfill the purposes of trust documents. These powers and duties can also be referred to by law. The California Probate Code Sections 16000 through 16015 imposes the following duties on trustees to beneficiaries:
- Loyalty;
- Avoid conflict of interest
- Unbiasity duty
- Disclosure is a duty
- Do not delegate your duty
- Separate trust assets;
- Trust claims must be enforced or defended.
Beneficiaries are responsible for the actions of trustees. Failure to fulfill their fiduciary duties can result in the successor trustee being held responsible for the actions of the beneficiaries. This could also lead to litigation that can slow down the estate distribution process. Common breaches include trustees using trust assets to their benefit, trustees causing damage to trust property, and trustees favoring certain beneficiaries over others. A lot of the breaches committed by successor trustees are due to their financial situation, neglect of their responsibilities or sibling rivalry, or bad blood between family members.
I know firsthand the frustrations that beneficiaries face when trustees are not up to the task. My father died when I was 10, and my half-sister became the successor trustee. Simply put, she didn’t appreciate that my dad was there for her and that we were sisters. Her actions as trustee reflected her feelings towards me. She made the proper distributions from trust for myself and my two half-siblings. However, she refused any responsibility regarding the trust assets.
I couldn’t do much as a minor and wrote off my inheritance until almost a decade later, when I was contacted again by someone with information about my inheritance. Naturally, I reached out to my half-sister, the successor trustee, to inform her that I had information regarding my inheritance. I also expressed my appreciation for her continuing with the matter. She refused. She refused repeatedly. Since I was only a beneficiary, I had no legal standing and could not pursue my inheritance. The successor trustee was the only one with this power.
I know firsthand the frustrations that beneficiaries face when trustees are not up to the task.
My half-sister was responsible for my father’s estate. It wasn’t until she brought me a case against her that I was able to ensure my inheritance. Although the case was not resolved and there were only a few hearings, I believe that I would have been denied anything my father intended.
This is why I became an estate planning attorney and probate lawyer. I love to educate people, whether they are potential clients, successor trustees trying to navigate the waters in their fiduciary duties or beneficiaries who want to ensure their interests are protected.
All of this being said, it is important to consider the personalities of those involved when you select successor trustees or beneficiaries for your trust. It is possible that you already have a candidate to become your successor trustee. Most people feel more comfortable choosing a family member, friend or child to act as their successor trustee. Parents who don’t want their children to feel they’re choosing a ‘favourite to take over after them are gone’ will name all their children co-trustees.
Names of more than one person can cause disagreements or discord, depending on how they relate to each other. It’s like the old saying “Too Many Chefs in the Kitchen spoil the Soup”. The same holds true here. Too many successor trustees can make it difficult for the trust to be properly administered. This can lead to another court proceeding where the judge will need to direct the trustees.
It is therefore important to determine if the person(s), you are considering as your successor trustee(s), are:
- Trustworthy
- Highly responsible
- Willing to follow your trust’s instructions without taking shortcuts
- High-stress situations can be handled
- Excellent in money management
- Collaboration, communication and accessibility
When a loved one dies, grief and greed can cause stress for all involved in trust administration. You can ensure that your wishes and avoid probate by choosing the right successor trustee. This is essential in taking care your estate and loved ones when you’re gone.
Talking to your beneficiaries and successor trustees about your plans is a great way to avoid conflict in the future, potentially litigious situations, and disappointed expectations. It is crucial to tell them how you plan to divide your estate, and who will manage your trust. It may not be easy to have a conversation with you, but it is often a worthwhile one.
It is a wise investment to create a trust. Protecting your assets and legacy from probate is a great investment.
Brianna Giliberto-Hermann, Founder
Law Office Brianna J. Giliberto–Hermann
1730 West Cameron Avenue Suite 200 West Covina CA 91790 USA
Tel: +1 626-391-8277
About Brianna Gliberto-Hermann
My name is Brianna Giliberto-Hermann. I was a dual-major in art and history at the University of La Verne before I began my legal career. I also cared for my grandmother. My passion for justice and my natural talent in trial advocacy led me to Western State College of Law, where I earned my Juris Doctor degree. In 2020, I was awarded the Wallace R. Davis Public Service Award. My own law firm, Law Office of Brianna J. Giliberto – Hermann, was opened on 15 March 2021. I have helped hundreds of clients. My primary areas of practice are estate planning, probate, and trust administration.