SUMMARY OF ESTATE PLANNING PROVISIONS

Paragraph 2.A. designates the name of the Trust. This is the name you will use to re-title your assets to the Trust.

Paragraph 2.B. sets forth your family situation.

Paragraph 2.C. designates who shall act as your successor Trustee in the event you are no longer able to act; either due to your death or your incapacity.

Paragraph 2.D. enables you (or anyone else) to add property to the Trust, either during your lifetime or at death.

Paragraph 2.E. defines the terms used through the Trust.

Paragraph 2.F. establishes the laws of California as the operative laws controlling this Trust, but allows the trust to remain valid throughout the entire United States Territories.

Paragraph 2.G. is often referred to as a “Spendthrift Clause” because it prevents a future beneficiary from alienating (“selling”) his or her interest in the Trust (usually for pennies on the dollar); it also keeps a creditor or ex-spouse of a beneficiary from being able to reach the beneficiary’s interest in the Trust.

Paragraph 2.H. is the Maximum Duration of Trusts provision (it is also known as the “Rule Against Perpetuities”) and most all states require it to be included in a trust. Basically, the rule states that, regardless of circumstances, a trust (or an interest in the trust) must end at some point in the future; it does not mean that the trust must continue for that period. Since these laws can change, your Trust merely states that the Trust will end, assuming it was still on-going, at the end of the maximum period under California law at that time. Please note that it is extremely unlikely that this provision will ever be needed, but it must be included.

Paragraph 2.I. is the “No Contest” provision in the Trust. It states that, to the extent permitted under California law, if anyone challenges the validity of the Trust or your intent as expressed in the Trust, that person and his or her descendants will receive nothing from the Trust.

Paragraph 2.J. sets the requirement that a beneficiary must survive you by at least thirty days to receive his or her distribution. This can avoid an unnecessary probate of the beneficiary’s share of the Trust.

Paragraph 2.K. creates some general rules (which will not override any specific distribution provisions) of what will happen to any Trust distribution going to a beneficiary who is under the age of 25 or who is incapacitated at the time of the distribution. Again, if you have made specific provisions (for example, holding a Trust share until age thirty), those specific provisions will take precedence over the general provisions in this paragraph. One of the important provisions of this paragraph is the discretionary right it gives to the Trustee to hold any distribution for a beneficiary deemed by the Trustee to be incompetent or suffering from substance abuse, or because the beneficiary’s financial circumstances are such that failure to delay the distribution would actually reduce the Trust benefits to the beneficiary (e.g., a beneficiary who is receiving state assistance of some kind).

Paragraph 2.L. provides that the Trustee can distribute an interest in the Trust if the cost of administering that interest makes it uneconomical to continue the Trust administration on that share.

Article III has detailed provisions concerning the Trustee.

Paragraph 3.A. reiterates your authority to designate anyone you wish as a co-Trustee or as a successor Trustee.

Paragraph 3.B. gives the beneficiaries the authority to appoint a new Trustee if, for any reason, no Trustee is acting and there is no successor Trustee designated or able to act; otherwise, the court would appoint the new Trustee.

Paragraph 3.C. gives any Trustee the right to resign and, if there is not a designated successor Trustee, to have a successor Trustee appointed by the court.

Paragraph 3.D. releases a successor Trustee from any liability for the actions of a predecessor (although the predecessor Trustee would still be liable). Without this protection, no successor Trustee would ever be willing to act.

Paragraph 3.E. eliminates the requirement that a Trustee post a bond prior to acting. A bond is very difficult to obtain when there is no court supervision and is very expensive (it is paid out of the Trust assets); it can also be a “Catch-22” situation because the successor Trustee cannot gain access to the Trust assets to pay for the bond until he or she becomes the Trustee but cannot become the Trustee until the bond has been posted. The best advice is to designate successor Trustees you can trust.

Paragraph 3.F. sets the compensation of a successor Trustee. If a Trustee is a corporation (i.e., a bank) the compensation is the Trustee’s published fee schedule; however, when a Trustee is an individual such compensation shall be a reasonable fee based on the time and effort of the Trustee. A Trustee is also entitled to be reimbursed for all necessary expenses incurred in the discharge of the Trustee’s duties. The last sentence in the paragraph gives the Trustee the right to determine how the fees should be allocated.

Paragraph 3.G. discusses the reporting requirements of the Trustee. In general, a Trustee must report (“account”) to the beneficiaries of a trust at least annually. Obviously, while you are the Trustee (and the beneficiary) it is not necessary for you to account to yourself; further, a beneficiary can waive (“give-up”) the requirement. An accounting becomes final when it is given pursuant to this paragraph and it is not objected to within one hundred and eighty days.

Paragraph 3.H. outlines the manner of payment of Trust assets to the beneficiaries. This paragraph releases the Trustee from liability for any payment made in conformance to the paragraph.

Paragraph 3.I. means that a Trustee can hold separate trust interests in a common account but must maintain a separate accounting for each interest.

Paragraph 3.J. defines certain actions a Trustee can take; for example, a Trustee can, just as you can, give another person a “power of attorney”. If there is a dispute between co-Trustees, the paragraph directs that majority rule prevails; but if only two co-Trustees are acting, then the paragraph sets-up the procedures to be followed to resolve the conflict.

Paragraph 3.K. gives your successor Trustee the right to obtain your health care information which would otherwise not be accessible under the privacy provisions of the federal Health Insurance Portability and Accountability Act (“HIPAA”); because of specific California regulations on the execution of a release concerning your protected health information, there is also a separate waiver form. A similar provision is also in your General Power of Attorney and your Health Care power.

Paragraph 3.L. authorizes the Trustee to collect any life insurance which is payable to the Trust (i.e., the Trust is the beneficiary of the policy).

Paragraph 3.M. provides that a discretionary power given to the Trustee to invade or utilize the principal of a Trust for “health, care, education, support or maintenance” of a beneficiary shall not be a General Power of Appointment (as defined in §§2041 and 2514 of the Internal Revenue Code) which could have adverse tax consequences. The paragraph also clarifies a provision in the California Probate Code concerning discretionary powers given to a trustee.

Paragraph 3.N. permits a Trustee to release or to restrict the scope of any trustee power if necessary for an appropriate reason (such as avoiding an adverse tax consequence).

Article IV grants the powers of the Trustee.

In general, the Trustee will have the same level of control over the Trust assets that you have prior to transferring the assets into the Trust. The actual powers are set forth in Exhibit A to the Trust.

Article V contains your retained rights as the creator of the Trust

Your right to revoke (Paragraph 5.A.) or change (Paragraph 5.B.) the Trust at any time during your lifetime; that these powers terminate at your death (Paragraph 5.C.), and that these powers cannot be exercised by anyone other than you (Paragraph 5.D.). There are also provisions concerning your right to use your personal property (Paragraph 5.E.) and your principal residence (Paragraph 5.F.) without accountability to the Trustee (if you are not acting as the Trustee at any point during your lifetime); in addition, Paragraph 5.E. ensures that you are entitled to any “homestead” exemption even though your residence is titled in the Trust.

Article VI is the part of the Trust that controls how the assets of the Trust are to be distributed; both during your lifetime and then after your death. It is the distribution after death when the Trust acts like a Will, except the assets can be distributed without court supervision (i.e., no probate).

Paragraph 6.A. restates the Trustee’s basic responsibility.

Paragraph 6.B. states your unlimited right to the income and principal during your lifetime. In addition, you are giving the Trustee the right to continue your support of a dependent.

Paragraph 6.C. allows the Trustee to accumulate the Trust income and/or distribute the Trust principal in the event you are incapacitated; it also states your desire to stay in your principal residence as long as possible and/or to return to your residence from a care facility as soon as it is medically reasonable.

Paragraph 6.D. gives the Trustee the right to delay distribution of the Trust for up to six months after your death. This time frame is tied to the federal estate tax “alternative valuation date” (the right to revalue the estate for tax purposes six months after the date of death), but more importantly it gives the Trustee some time to make sure all of the assets have been located and all of the debts and bills have been paid before being pressured by the beneficiaries to make distributions. This does not mean the Trustee cannot be making some or all of the distributions in the meantime.

Paragraph 6.E. authorizes the Trustee to pay from the Trust all of your debts, funeral expenses, the costs of administration and any taxes. Because legally the Executor of an estate has this responsibility, this paragraph coordinates the payment with the Executor if one is appointed or gives this authority to the Trustee if one is not appointed (as is typically the case). The provisions for the payment of any death taxes is fairly technical; the important point here is that the taxes (if any) are paid from the balance of the Trust before final distribution.

Paragraph 6.F. is the place in the Trust where you direct how your Trust (including any assets added to the Trust after your death, such as life insurance or assets passing through the “Pour-Over Will”) shall be distributed at your death. The first subparagraph lets you control the distribution of any tangible personal property (i.e., “things”) through a separate list of instructions (this form is included with your Trust papers). Please review this paragraph carefully.

DECLARATION OF TRUST:

Under certain, very limited circumstances, this Declaration could possibly be helpful after your death if you neglected to transfer a valuable asset to your Trust; it merely confirms that you intended to include all of your assets within your Trust. This Declaration is not a substitute for the requirement that you must transfer (“title”) your assets into the name of your Trust in order to avoid a potential probate of those non-Trust assets.

CERTIFICATION OF TRUST:

The Certification sets forth the existence of your Trust and your unlimited right as Trustee to deal with any account or asset held in the Trust. The Certification acts as a short version of the Trust Agreement and gives any third party all the information required from the Trust without getting into the dispositive provisions, which are (and should remain) confidential.

ASSIGNMENT OF PERSONAL PROPERTY:

This Assignment acts as the method of transferring all of your tangible personal property assets (generally such assets do not have a title or an ownership document) to your Trust (thereby avoiding the necessity or possibility of having to probate these assets); this Assignment also transfers your digital assets and/or rights (including any “social media”, on-line accounts and/or email accounts) to the Trust.

INSTRUCTIONS FOR THE DISTRIBUTION OF MY PERSONAL PROPERTY:

This is an optional form and can be completed at any time (you should make copies of it for future use). This is where you can designate specific items of your tangible personal property (i.e., your “things”) to go to certain people at your death. For example, “I give my diamond engagement ring to my daughter MARY”; “I give my stamp collection to my grandson MICHAEL SMITH”; etc. You should NOT, however, use this form to designate cash gifts or specific Trust assets. You can add to or change this form as often as you wish without having to amend your Trust or execute a codicil to your Will; if you do add or delete a distribution, you should date and initial the addition or deletion (or complete a new form and destroy the old one).

WILL:

Your Will is commonly referred to as a “pour-over” will. Under the terms of the Will, any assets held by you that have not previously been transferred into your Trust will be added to the Trust at the time of your death (but may be subject to a probate administration in order to do so). The purpose of this is to make sure all of your assets (whether in the Trust or not) are distributed according to the dispositive plan set forth in the Trust.

DURABLE POWER OF ATTORNEY FOR MANAGEMENT OF PROPERTY AND PERSONAL AFFAIRS:

This is your “general power of attorney” which is primarily intended to give your named agent the power to deal with any trust or non-trust assets in the event of your incapacity. Please be aware that this document gives your agent broad powers to dispose of, sell, convey and encumber your real and personal property; if you have any concerns about granting such broad powers, please contact me at once.

ADVANCE HEALTH CARE DIRECTIVE:

The Advance Health Care Directive gives your named Agents the power to make medical decisions, and sign consents and/or releases with hospitals and/or doctors [it conforms to the new Federal Laws (known as “HIPAA”) with regard to the releases]. It also acts as your “living will” for end-of-life decisions.

DEMENTIA DIRECTIVE:

The Voluntary Advance Directive for Oral Feeding and Fluids in the Event of Dementia sets forth your wishes regarding the administration of food and hydration in the event you are suffering from an advanced stage of Alzheimer’s or another incurable, advanced dementing disease. You have selected that you would wish for only limited hand feeding or hydration.

HIPAA AUTHORIZATION AND WAIVER:

The HIPAA Authorization and Waiver is a “stand-alone” document to authorize your health care providers to release information concerning your otherwise confidential medical information to the individuals you have designated to act on your behalf in the event of disability and to any other individuals who you would also want to have such access. Please note that state law requires that the form be generated in “14 point type-face”.

FINAL DISPOSITION INSTRUCTIONS:

These Instructions give you the opportunity to specify how you wish to have your remains dealt with (i.e., cremation or burial); to provide details of any prior arrangements and to designate the persons to carry out your wishes.

ADDITIONAL DOCUMENTS BASED ON YOUR SPECIFIC CIRCUMSTANCES:

The above list is an example of the provisions of a typical estate plan. PLEASE NOTE, additional documents and considerations will be needed depending on your specific circumstances.

Do you own a business, have debts owed to you, or have minor children? Do you plan to gift to children or grandchildren? Do you plan on providing a gift to someone who spends money quickly or has special needs? These aspects require further discussion and documents in your estate plan.

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