Legal Question in Wills and Trusts in California

Re: revocable trust a/b/c

I'm guessing A covers community property and B and C covers separate property. So if a spouse dies, then the trust is either split into A/B or A/C. Since there is nothing in either B or C, then there should only be a trust containing Schedule A property.

If the trust has a provision allowing the surviving settlor to revoke the entire trust, including all community property assets, then you could simply have a new revocable trust made up. It all depends on what the trust allows the surviving trustee to do. Read carefully, because recent court rulings have restricted revocation of trusts with community property unless there is specific powers given to the surviving settlor to be able to revoke or amend the trust.

I believe you DO get stepped up basis with the property in the trust. This is especially the case if the property is community property, not joint tenancy property. It appears that this was not meant to save estate taxes. It is possible, this ABC Trust is different from another often referred to ABC Trust called QTIP trust used by the wealthy to shelter a couples assets from estate taxes. The QTIP trust is used to shelter estate taxes for estates over $7 million in 2009. So I don't think this is that kind of trust.

Re: revocable trust a/b/c

I do not know how your trust was set up, but this is how our trusts work.

First, you also need reciprocal mirror wills that feed into the trust. Second, you should have surable powers of asset management to cover items not listed as trust assets, such as bank accounts and vehicles. Also, you may want to make sure you have durable powers of healthcare, also known as living wills. That all being said...

A standard married couple trust will split into an A-B trust at the passing of the first party. The maximum allowable deduction will be placed into the decedent's trust. This can also be a % of your home if it is valued over the maximum value. This immediately becomes an irrevocable trust. The survivor's trust is still changable by the surviving spouse, but the irrevocable can only be used for necessities after exhaustion of the survivor's trust. Accordingly, you are not allowed to draft a new trust even if you use the same beneficiaries or you will almost certainly face a step up in basis for whatever you place in the decedent's trust (which is usually a home).

The fact that the home is worth $200,000 means that it is over the threshhold of $100,000 which requires a Probate if it is not part of a family trust, so, actually, the trust you have is created to save on taxes.

It sounds like you purchased on of the out-of-the-box form trusts and those can be very dangerous because they often do not express your actual intent or desires. This is why most trust attorneys tell their clients to shy away from them.

I recomend you meet with a trust attorney to go over your estate planing to ensure that it is (1) complete and (2) meets with your and your husband's present and future desires.

If you would like to discuss this matter further in a more private forum, please feel free to contact me directly at the email address provided by LawGuru or through our firm�s website located at PasadenaEstatePlanning.com

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