A common question people ask when they come in to do an Estate Plan is whether their retirement benefits i.e. the 401K, IRA or pension account should be in a Revocable Living Trust (“RLT”). As you may recall, a RLT is a legal document created during your lifetime that allows you to leave your real and personal property to beneficiaries of your choice. A RLT is very much like a Will with one BIG exception: there is no Probate with a RLT.

The most common asset put into a RLT is real property. By putting real estate into a RLT there is no probate and minimal time delay incurred in transferring assets to beneficiaries with a RLT because no court approval is required.

The question is more complicated when it comes to having an estate plan that calls for the RLTs to be a beneficiary of retirement accounts. The first question we ask is whether there is a strong estate planning reason to name a trust as a beneficiary, or is there a way to achieve the same planning goals without incurring the risks and complications of naming a trust?

Our first choice in drafting most estate plans will be for you to leave your retirement benefits i.e. your pension, 401K and IRA outright to your intended beneficiary. In most cases, this will be your spouse. However, what should you do if your spouse is not alive and you want to leave your benefits to minor children or to several beneficiaries?

If you want to leave retirement benefits to minor children or you want to leave to them to several people, these are compelling reasons why a RLT should be the beneficiary or a contingent beneficiary. If you name a beneficiary who does not have capacity to receive the benefits i.e. a minor child, then a conservatorship will be established by the court at great expense to the minor child.

If you have retirement benefits and are considering making a RLT a beneficiary, you will need to check with your retirement benefit administrator regarding naming a RLT as your beneficiary. Different companies have different rules. Sometimes they require an attorney drafted designation. Also, it is critical that your beneficiary designation is correct and reflect your intentions. Who you put on the designation is the person who gets the money. They have no obligation to share with anyone else.

If you are considering leaving retirement benefits in a RLT, the beneficiary of the trust must be a person or group of people. You can’t use a trust to leave retirement benefits to a charity, your church or another trust or any other entity. That is not to say that other assets of your trust cannot go to a charity or church or another entity, just not the retirement benefits.

Today retirement benefits are very valuable. Take the time to understand what your current estate plan for the benefits is and what other options are available to you and your family. For most people, an Estate Plan including a RLT and all of the ancillary documents including a Power of Attorney and Healthcare Directive should not cost more than $2,000-2,500. Most attorneys allow people to make payments over time for the work. If you have separate property from a prior marriage, business interests that need to be included or a taxable estate, it may be more, but then it is even more important that you properly plan for distribution of your assets in accordance with your wishes without the prying eyes of the public and court system.

I see people every day for a FREE 30 minute consultation in Walnut Creek and Brentwood.

This article provides only general legal information, and not specific legal advice. Information contained is not a substitute for a personal consultation with an attorney. LAW OFFICE OF JOAN M. GRIMES, PHONE (925) 939-1680 1600 S. Main Street, Suite 100, Walnut Creek, CA 94513 © 2015 Joan Grimes

A common issue in second marriages or where couples are not married is what will happen to the family home on the death of the first person. This is especially true if only one person is on title to the real property.

There are a couple of different ways to handle this issue. One option is for the surviving spouse or partner to have a right to occupy the property during the remainder of their lifetime. In this case, the surviving spouse or partner would not have any ownership interest in the real property and would not be on title to the real property. Usually, during the period of occupancy, title to the real property is held by the trustee of deceased person’s trust. The right to occupy is a personal right and therefore cannot be sold or transferred. The person with the right to occupy may or may not have responsibility for expenses related to the property. The right to occupy is also sometimes used to help adult children who need additional time to save money or resolve other issues.

A second option is for the surviving spouse or partner to have a life estate in the real property. Unlike a right to occupy, a life estate is a form of legal title to the property which the holder can sell. If the spouse or partner needs to move, they then have the “right” to sell their interest in the real property i.e. the value of remaining life to a third party. Depending on the relationship with the other beneficiaries, the couple may want the surviving spouse to have a life estate in order to avoid any dispute with remainder beneficiaries as to the rights of the surviving spouse.

Whether you choose to include a right to occupy or life estate in your estate plan, it is very important to address issues surrounding the occupancy. The most common issues are the payment of expenses on the property, who may occupy the property, what will happen during any period of absence and the right to sell the property if the surviving spouse only has a right to occupy the property. Given the issues involved, the couple should consider having an agreement separate and apart from the owner’s trust outlining the intentions of the parties which can be signed by the party who would have the right to occupy or be receiving the life estate interest.

If you have any questions regarding an existing Trust or would like to discuss adding the right to occupy or life estate interest to your Trust, I see people every day for a FREE 30 minute consultation in Walnut Creek and Brentwood.

Law Office of Joan Grimes

Law Office of Joan Grimes

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