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Most trusts are revocable which means that a grantor can make changes to it during his or her lifetime. Revocable trusts are frequently used in estate planning as a means of avoiding probate court by placing valuable assets under the ownership of a sole entity.

However, this brings up an important question. If you transfer property under your name to a trust, are you still responsible for taxes? Does the trust need to file its own tax return? If so, who is responsible for paying those taxes?

If you’re in the process of setting up a trust or considering setting one up, you may be wondering what kind of impact taxes will have on you and your heirs. The short answer is, you probably saw this coming, no, you don’t get to avoid tax altogether. One way or another, Uncle Sam will find a way to collect his share. But that does not mean that a living trust is not worth the effort and that it can’t save you money. So what kind of impact will taxes have on you, the trust, and its beneficiaries? Let’s take a look at how taxable income affects two phases of a trust: during the life of the grantor and after the death of the grantor.

During the Life of the Grantor: Grantor Trust Taxation

A grantor is a person that creates and funds a living trust. Revocable trusts are the most common as these allow the grantor to modify or dismantle it altogether. Essentially, a grantor has the power to move assets in and out of the trust or terminate it. If you’re the grantor, you can also collect income and principal from trust assets. But like any income, whether it’s from employment, rent, or other sources, the IRS will tax it at the standard rate.

If you establish a trust, the IRS identifies it through your social security number. You are not required to file a separate tax return. If you receive income from trust assets, you would report this on your individual return. The assets, however, remain under the ownership of the trust.

Special Circumstances when a Trust does have to File a Separate Tax Return

When a grantor dies, a trust is responsible for filing its own tax return. In this case, the trust would be identified through a separate tax ID number. However, there may be unique situations that could require using a different tax ID while the grantor is still alive. For example, if you become mentally incapacitated, the individual you have named as a successor will have to file under a different tax ID from your social security number. Your successor would apply for an EIN, an Employer Identification Number. Through the setup of EIN, a successor can protect themselves from paying income taxes while still carrying out their duties set forth by the grantor. A trust with an EIN has to file its own tax return on an annual basis.

Can you still establish an EIN for a trust even without special circumstances?

Yes, you can still establish an EIN without special circumstances like incapacitation. For example, if a grantor has personal taxes that are highly complicated and wishes to keep those items separate, establishing an EIN can simplify reporting. In doing so, a grantor wouldn’t have to report personal income and losses on the trust. However, he is still responsible for paying taxes on any income.

After the Death of  the Grantor: Living Trust Taxation

After a grantor’s death, a trust becomes irrevocable and continues as its own entity responsible for its taxes. An executor files the final tax return for any income that was earned during the final moments of the grantor’s life. For any income earned after the death of the grantor, an individual tax return must be filed.

Once trust assets are distributed to its beneficiaries, any income that these assets earned would be reported on the beneficiaries individual tax returns. It is important to note that this only applies to any earned income, like interest, and not principal. Principal balance from a trust is non-taxable. If no distributions are made, then the living trust must continue filing its own taxes on a yearly basis.

In Summary

Establishing a living trust is a powerful and popular estate planning strategy. It can save you and your heirs a considerable amount of money. Of course, establishing one requires effort and a great deal of organization and understanding about probate law and other issues, including tax implications. Every family’s situation is unique. An estate planning attorney can help you and your family determine the right course of action for your wealth management needs.

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L1 non-immigrant visas allow multi-national companies to transfer their employees to the United States. There are two types of L1 visas: L1A, and an L1B.

If you’re a manager, executive, or business owner, an L1A visa can grant you a stay for as long as 7 years. If you’re an employee with specialized skills and knowledge, an L1B visa grants you a stay for as long as 5 years. To be eligible for either type of visa, you must have worked for the company for a minimum of 1 year in the past 3 years outside the United States.

Qualifying for an L1A Visa

To qualify, you and the organization that you represent must be able to show that you are employed in an executive or managerial position. The definition of “managerial” or “executive” must comply with U.S. immigration policies.

To apply for an L1A visa, you must meet the following requirements:

• Have a transfer offer from your employer
• File form DS-160
• Your employer must file from I-129
• Submit an application fee along with supporting documentation

Does an L1A visa allow you to bring your family to the U.S.?

Yes, an L1A visa allows the holder to travel with dependents. However, your eligible dependents are only your spouse and unmarried children under the age of 21.

L1A Visa for Business Owners

If you’re looking to come to the U.S. as a business owner, you must be able to prove that you’re a major stakeholder in your company and that you plan to return to your home country after your assignment is completed. You and the organization you represent must also supply evidence that demonstrates that your role functions in a capacity that deals with services between your home country and the United States. However, it’s important to note that just because an L1A indicates a provision to return to your home country, it does not mean that you’re not able to extend your stay or change your status, including applying for permanent residency.

Qualifying for an L1B Visa

L1B visas are for employees who hold positions that require special skills and knowledge.

What is Considered Specialized Knowledge for an L1B Visa?

The U.S. Department of Immigration Services has specific criteria for what it considers “specialized knowledge.” If your company hired you because you hold particular skills or other assets that are integral to your company’s key operations, then you would be considered eligible. Qualifying under this category also means that it would be impossible or quite difficult for your company to find someone else who can fill your position. To be L1B eligible implies that you have worked for your company for a considerable amount of time and have been entrusted to carry out a specific job that requires a rare talent or skill.

Differences in Length of Stay for an L1A Visa and L1B Visa

There are different timeframes for how long you can live and work in the United States under an L1 visa.

For newer organizations, the U.S. Department of Immigration grants L1 visas for a period of 1 year. For more established companies, U.S. Immigration Services grants L1 visas for a period of 3 years. However, you can re-apply to have your stay extended every two years for as long as 7 years if you’re an L1A holder and for as long as 5 years if you’re an L1B holder.

Can I apply for a Green Card after my L1 Visa Expires?

Both L1A and L1B visa holders are eligible to apply for permanent residency. An L1 visa does not require you to return to your home country after your term has ended. You may apply for a green card on the basis of employment.

Do I need help from an attorney if I’m applying for an L1 Visa?

Applying for a visa, or any other immigration document, with the help of an attorney can expedite your processing time.

Although some immigration procedures are relatively straightforward, others are not. Each scenario can vary by your individual circumstances. If you suspect that there may be unique challenges to your ability to qualify for a visa, it’s best to consult an immigration attorney for advice. Retaining an attorney is especially crucial for individuals who have been previously denied entry, convicted of a crime, or who face immediate deportation.

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You can almost say that living trusts come in many different shapes and sizes. Given the many estate planning options available to individuals, it is no wonder why so many are overwhelmed by the complexities of it all and end up procrastinating on their life planning goals. Adding to that complexity is the issue of the foreign nationals who wish to set up a trust for the benefit of U.S beneficiaries. However, these individuals may be in one of the most advantageous positions for safeguarding their wealth.

(If you are just getting acquainted with estate planning, a living trust is a legal instrument that holds and manages assets for beneficiaries. A grantor is a person that sets up the trust and owns the assets. A trustee is a person who manages the trust and can be appointed by a grantor. A grantor can also serve as a trustee.)

The cliche of the United States as a melting pot is truer now than it at any time. A large portion of the U.S. population has roots in almost every corner of the world. And it’s in these places where many families have established themselves and accumulated wealth, sometimes for many generations. Many families in the U.S. are made up of foreign nationals with U.S. born children. These individuals may own assets abroad, usually in their country of origin, but also in the United States. The question for them is how to set up a trust that benefits their U.S. born beneficiaries while allowing them to preserve as much of their wealth as possible, including valuable assets they may own overseas. Here we discuss two options for them, a foreign grantor trust and foreign non-grantor trust. But first, let’s define the differences between grantor and a non-grantor.

A Grantor Trust Vs. Non-Grantor Trust

A non-grantor trust is an arrangement in which the donor (grantor) withdraws all of his/her control from the trust. Essentially, he or she gives up control over the assets and any income they produce – an example would be a property that generates rental income or stock positions that pay dividends. A non-grantor trust also means that this person gives up any right to rescind or amend the trust altogether. Quite simply, a grantor gives up control over all aspects of the trust and its assets. On the flip side, a grantor trust allows that person to hold control over the assets and any of its income benefits. This person can also make changes or rescind it completely.

Revocable Foreign Grantor Trust

An individual that is not a citizen or resident of the United States can set up a foreign grantor trust with assets acquired abroad as well as assets that were acquired domestically. As long as the grantor is living, the trust remains revocable which means that he/she can control the trust and its contents. He or she may appoint trustees as well as collect any income it makes from the trust assets. Upon the grantor’s death, the trust becomes irrevocable. Irrevocable means that the grantor cannot dismantle or amend the trust in any form.

A Revocable Foreign Grantor Trust becomes Irrevocable Upon the Grantor’s Death

Once it becomes irrevocable, any assets held in the U.S are subject to estate taxes, but assets owned in another country are not taxable under U.S. law. However, tax rules may still apply to them in their country of origin. An irrevocable trust becomes a single entity and it is responsible for filing its own tax return. Furthermore, if the trust produces any income from assets owned abroad, those profits are is subject to Federal Income Taxes. If the beneficiaries receive any income or capital gains, they must report those amounts on their own individual tax returns.

Irrevocable Foreign Non-Grantor Trust

For foreign-born nationals who are not residents or citizens of the U.S. and wish to transfer property to their heirs as gifts, these individuals may do some with the formation of an irrevocable foreign non-grantor trust. The grantor transfers assets to the trust as a gift. Gift taxes would apply to tangible assets held in the United States. Tangible assets would be considered real estate and personal items. The U.S. gift tax does not apply, however, to intangible assets. Stocks, bonds, and other securities are considered “intangible.” Gift taxes also do not apply to property owned outside of the U.S., including securities held in non-U.S. companies.

The main appeal for this type of trust is that it allows a foreign national to transfer an unlimited amount of wealth to beneficiaries free of many applicable taxes. It’s important to note, however, that the trust itself and the beneficiaries are still responsible for reporting any income and capital gains on their own tax returns. Keep in mind that an irrevocable non-grantor trust is a separate tax entity liable for filing its annual tax return.

In Summary

Both foreign grantor and non-grantor trusts present opportunities for foreign nationals to accumulate wealth abroad, as well as domestically, and pass it into the U.S while substantially reducing their tax liability. Foreign property and intangible U.S. assets can be transferred as gifts through the setup fo an irrevocable non-grantor trust. However, with an irrevocable status, the trust owner may not make changes or dismantle it during the owner’s lifetime. Instead, a trust owner wishing to have control over the trust and its assets would want to create a foreign grantor trust.

It’s also important to point out that while U.S. owned intangibles such as stocks and bonds can be put into foreign non-grantor trusts as gifts, cash accounts may not qualify the definition of “intangible.” Furthermore, the tax saving benefits that apply to both of these types of trusts are only applicable in the United States. Foreign-owned property and other assets may still be subject to taxation under the laws of the foreign country in which they are owned.

Regardless of which approach you chose, there will always be nuances to each individual’s wealth preservation scenario. It is best to consult the advice of an estate planning attorney that is knowledgable with setting up trusts for foreign nationals.

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Under California law, an individual can set up a will, a living trust, or both, as part of their estate plan. They both have fundamental differences, but if you’re a California resident, and you’re wondering which one is right for you, it’s important to understand how each function under the state’s law. It can help you decide which approach you should use toward meeting your estate planning goals.

Wills in California?

Most of us are familiar with the basic concept of a will. It’s a document that states the wishes and desires of a person after he or she has passed away. A will is a legal document recognized by the court that can include instructions on distributions of property.

In California, wills have limited power. A person may only use it to name beneficiaries for their owned assets, nominate guardians for their children, and appoint executors. A will also states instructions for burial or cremation as well as any other details about the person’s preferences for memorial services.

A California will has formal and legal authority, but it is limited to the concepts we have described above. A will on its own may be enough for individuals who own very few assets. However, assets can range from physical property to pensions and retirement plans. The truth is that many people may have more complex estate planning needs that would require more than just a simple will.

A Living Trust

Like a will, a person can use a trust as an estate planning instrument to transfer property to named beneficiaries. The significant difference between a trust and will is that a trust operates independently from probate. A trust can be made revocable which means that it can be changed at any time during the grantor’s lifetime. However, it can also be made irrevocable, which means that it cannot be altered.

A trustee manages the assets that a person chooses to place in the trust. If you’re the person creating the trust, you can serve as a trustee, or you can appoint someone other than yourself to serve as trustee. While a grantor and trustee can be the same person, it helps to designate an individual other than yourself to manage the trust. This decision can protect you if you become incapacitated during your lifetime and are unable to make important decisions. Your appointed trustee can be in charge of carrying out the instructions outlined in the trust during your incapacitation or after your death.

Combining a Will and Trust Together: Should You Use Both?

The use of a living trust and a will together as part of your estate planning is acceptable under California law. The benefit of this approach is that you can address separate issues on each document. You can use a will to name a guardian and executor whereas a trust allows you to transfer property without the interference of probate, which by the way, is impossible to do so through a will.

Combining a will and a living trust is profoundly beneficial is when you have young children. The will lets you designate guardians for them, while the trust enables you to provide enough funds for future expenses such as college tuition.

Before You Choose, Make Sure To Understand Your Various Estate Planning Options

You have several options for planning your future through the use of either a will, a trust, or a combination of both. However, within each category, there are more specific variations. Many family members may remain confused about knowing which estate planning strategy is right for them. The number of assets, the people you plan to involve in the process, and your desires all need to be laid out carefully. Estate planning mistakes can be costly, and there isn’t much room for error.

An estate planning attorney with knowledge on wills and trusts can help you explore your options based on your personal needs and help you determine an appropriate strategy that guarantees your assets and loved ones will be protected.

Have more questions about wills and trusts? Contact us for an appointment.

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Usually, couples don’t get married and say to themselves, “let’s do this for five years then part ways.” After all, “diamonds are forever”, and not for just a few years. But with nearly half of all marriages in the U.S. ending in divorce, entering any relationship, whether it’s a business partnership or marriage, carries risks. Many couples will enter prenuptial agreements to protect what each one owns. But even prenups cannot protect you against surprises at the end of a marriage. Courts have the power to overturn the agreement and award your ex-spouse some of your assets.

Prenuptial Agreement Vs. Trust

Consider the following scenario. Let’s assume you and your spouse entered a prenuptial agreement ten years ago. But for whatever the reason, your marriage ends in divorce. Now, your former spouse claims half of your assets, even though you both signed a prenup when you both were engaged.

A divorce court can still find many reasons to declare a prenuptial agreement as null. The reasons can range from paperwork not being filed properly to spouses being mentally unfit to understand what they signed.

Let’s assume that in your case, the court declares that your prenuptial agreement was not drafted correctly due to filing errors and is now considered invalid.  You thought that assets you acquired before marriage were safe from your ex, but the court decides otherwise and awards half of your real estate assets to your ex-spouse. In this instance, a trust may have protected you from your ex-spouse’s claim.  It is vital that we emphasize “may have protected” as many factors will depend on the timing and specifics of the trust itself.

How a Trust Can Protect You From Divorce

When you establish a living trust, you are taking the valuable personal property and transferring ownership of those items to another entity. This new entity is the trust, so it is the trust that owns the assets and not you. Trust assets are not subject to probate, increased tax liability, and in this case, claims from an ex-spouse during divorce proceedings. Your ex-spouse was once in a marriage with you, not the trust. A claim against the property in your trust is like an ex-spouse claiming half of your neighbor’s real estate during your divorce.

Although a trust is under the name of a trustee, which can be you, depending on the type and whether it is made revocable or irrevocable, the trust is always established for the benefit of named beneficiaries. Also, you can still enjoy the benefits of income-producing assets contained within the trust.

Keep in mind though, that income you receive from a trust is considered personal income which must be reported as such in your tax return. Moreover, this income can be considered when deciding spousal or child support. However, the fundamental point in this is that a trust, as a single entity, protects you from claims by others, whether that’s creditors or ex-spouses.

A Trust can Benefit Unmarried Business Owners the Most

Business owners gain the most from establishing a trust for their business. On the contrary, business owners also have the most at risk if they do not have a plan in place to protect what they have acquired throughout their business careers. Without proper planning, business assets can be at risk during a divorce.

How Can a Trust Protect you in a California Divorce?

In the state of California, several types of trusts, including those initiated before the marriage, are safe from divorce. Other types of trusts include domestic and foreign asset protection trusts. Both types are beneficial for business owners and effective estate planning tools not only against divorce but also for preserving your wealth by reducing tax liability.

The Differences in an Irrevocable Vs. a Revocable Trust in a Divorce

The main difference between these two is that in a revocable trust, as a trust owner, you can make changes and amendments to it while an irrevocable trust does not allow the trust holder to do so. It is worth mentioning that revocable trusts become irrevocable once the holder of the trust passes away or suffers incapacitation that limits him or her from making critical decisions.

Trust Distribution for Divorced Beneficiaries

For divorced beneficiaries, revocable or irrevocable trusts are of particular interest. A recipient of a revocable trust has no say for when distributions will take place. This decision is entirely up to the trust owner. For example, if you happen to be the beneficiary to your father’s trust, your ex-spouse cannot make any claims against the contents because you do not have ownership of that property. Legally, it is your father who owns them.

On the other hand, in an irrevocable trust, beneficiaries might have more control over distributions, all depending on the specifics the trust holder’s authority over how much power they hold. But in this scenario, if the beneficiary receives distributions or any income from the trust, it becomes the beneficiary’s responsibility. In this case, an ex-spouse may claim half of the income the trust distributes to you as a beneficiary.

Seeking the Advice of an Estate Planning Attorney

Usually, it is easier to marry than it is to undo a marriage. Complexities in a divorce are even more of a concern for high-net-worth individuals. Business owners and those who have accumulated substantial wealth before and during their marriages need to have an effective solution for managing risk.

We hope we stay married to our partners for a lifetime, but despite our best efforts, marriages fall apart.  As with all forms of risk, individuals must have plans in place for how they will protect their assets against failures, whether those be in a business or marriage.

While a trust can be a useful measure against protecting yourself in a divorce, setting one up or making changes to one, requires careful, detailed planning and the legal experience of an estate planning attorney who can look at your circumstances.

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Defining the Blended Family

Blended families are becoming increasingly common in our society. Remarried couples join together with the children from previous relationships and create a new family unit. Subsequent marriages usually happen after a divorce, but they can also occur after the death of a former spouse.

First-time married couples can also create blended families if one or both partners have children from other relationships. Likewise, unmarried couples can also form blended families under the same circumstances.

Blended Families Include Children Living Apart

Children from a previous marriage (or relationship) do not necessarily have to be living with the parent in order to constitute a blended family. For example, if your adult children live on their own, but you are remarried (or cohabitating) to a new partner, they are still part of your family.

Estate Planning Issues Among Blended Families

Higher divorce rates and lower rates of marriage mean that the number of blended families is also on the rise. Divorce is not only common in first marriages, but it can also occur in second or third marriages.

If a couple has several children from different relationships, you can get an idea of how complex a family structure can become. And if any of those previous relationships ended on less than peaceful terms, there might be the threat of an ex-partner claiming rights to your property. Consequently, the protection of those assets becomes all the more important.

With the ever-changing structure of the family unit, estate planning can present a vast array of challenges. Issues can arise between spouses or with children in the family. In addition, they can also happen after one spouse dies where disagreements occur between the surviving spouse and the remaining children. Most notably of these issues is favoritism over a parent’s own biological children and the potential of the other children to be excluded from any inheritance.  Another problem is when a child has to wait for the death of their parent’s spouse before being able to receive their inheritance.

Estate Planning Process for Blended Families

So what are some effective estate planning strategies you can take on for your blended family’s situation?

Have a Conversation with Members of your Family

If you want to avoid future complications, the first step is to have a discussion with members of your family. It may not be a comfortable topic to discuss, especially if you suspect that there will be disagreements. But this is your chance to address any differences of opinion and look for ways to work those out.

You’ll want to have this conversation before filing any paperwork and preferably before consulting an attorney. If you start to draft legal documents while there are still areas of disagreement, you may encounter legal disputes down the road.

During your conversations, you’ll want to discuss things like guardianship, long-term goals, finances, and other contractual obligations.

Review Your Plans from Previous Marriages

Take the time to review and update your beneficiaries regularly.  It is very easy to forget about retirement accounts from previous employers and life insurance policies you purchased in the past.

Your ex-spouse, or anyone else who is no longer part of your life, may still be listed as a primary beneficiary. In some instances, there may be contractual obligations in which you may not be able to remove someone as a beneficiary. It is best to consult with an attorney before making any changes to your beneficiaries. But the message here is to carefully review the names of your recipients on all of your plans.

Decide what Property Belongs to Whom

It is very common for second marriages to have imbalanced levels of wealth between spouses – meaning that one spouse owns more than the other. However, this inequality can also apply to first marriages, especially if the couple is marrying later in life and one or both partners accumulated substantial wealth during their single life.

Think about what you had before your marriage and what you are bringing as community property. Also, consider if you are leaving property separately for your own children from a previous relationship. The key takeaway here is to evaluate everything you own and determine what your intentions are with your property.  To put it simply, you will have to answer, “what’s mine and what’s ours?”

Estate Planning Strategies Blended Families May Consider

Estate planning strategies can vary in complexity, from a standard will to more sophisticated types of living trusts. What may work for you may not work for another family. However, generally speaking, you may need to create a living trust, a will, or a combination of the two. In addition, there will be other specific documents, such as a power of attorney, that may accompany your estate plan.

If you own a lot in assets and personal property, the best strategy may be to use both a living trust and a will. A will can be used for the distribution of smaller items such as family heirlooms and other property that you’ll want to keep separate from a trust.

For property and other valuable assets, you’ll want to create a living trust and transfer ownership of those assets to the trust where they will be held for the distribution of beneficiaries. You can make a trust to be revocable or irrevocable.

A revocable trust allows you to make changes to the trust as long as the grantor (the person who created the trust) is still living. An irrevocable trust, on the other hand, cannot be changed by the grantor, regardless if he or she is living or not. It is important to note that revocable trusts become irrevocable after the death of the grantor, though there may be exceptions.

Last but certainly not least, consider the issue of taxes. The benefit in estate planning is that there are many strategies that decrease your estate tax burden and let you keep more of what you have. On the other hand, a poorly drafted estate plan can also end up costing you more than necessary.

Get Help from an Estate Planning Attorney

Many individuals feel confident enough to be able to draft their own estate planning documents without an attorney. You may think that doing your own estate planning will save you money but in the end, it could end up costing you more.

Each family is unique and blended families are certainly no exception.

If you are thinking about planning your future goals with your new family in mind, consider speaking with an estate planning attorney to offer guidance so you can make the most out of your wealth and life planning goals.

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It is estimated that 4 out of 10 Americans have no will or other estate planning document like a living trust.

It is crucial for those who own valuable assets like real estate and especially important for adults with children, to have a legal document that spells out instructions for the distribution of their property as well as custody of their children.

But what happens if you die without a will in the state of California? Who gets your property, and who makes this decision? Here are several things you should know.

About Laws of Intestate Succession in California

When you die without a will (or other estate planning document), you die “intestate.” In other words, state law decides how your property is to be distributed regardless of your wishes. In some cases, the state can even take some of what you own.

The court’s decisions may cause conflicts of interest among family members and other people involved — but it does not matter, without a will, the state will act in accordance with the law.

Property Distribution in California Per Intestate Succession Laws

When distributing property, the state will look at your next of kin. This would include your spouse, children, and surviving family members.

Married With No Children

If the decedent is survived by a living spouse and has no dependents or other living relatives like brothers and sisters, the spouse receives all of your property.

Married With Children

If the decedent is survived by a living spouse and has dependents, the state will distribute property to your spouse and children.

The property gets distributed according to the number of children you have. For example, if you only have one child, ½ of your property goes to your spouse and the other ½ goes to your child. If you have more than one child, the state will distribute property according to each person’s fair share.

What Types of Property Are Subject to California’s Intestate Laws?

Not all property is subject to California’s intestate laws. If the person did create a trust, any property held within it would be excluded from probate. Other exceptions to this rule may include retirement accounts or other plans with named beneficiaries.

However, with no will, the state will consider the following, including whether the decedent owned separate property, community property, or both.

Separate Property

Separate property, or non-martial property, usually refers to anything you acquired before marriage but not always. For example, inheriting property during the marriage or anything you purchased with separate funds may be considered separate property. Also, any income you received from the separate property would be included. Nevertheless, state laws on what is deemed to be “separate” versus “community” property will vary.

Community Property

Community property, or marital property, is anything acquired during the marriage that doesn’t fit under the “separate property” category. Such property may include a home you purchased with your spouse and other assets such as joint bank accounts, furniture, and other items. Once again, state laws will vary on what is “separate” and what is “community.”

Separate Property Distribution On Its Own

If married without children or any other surviving relatives, the state will distribute all separate property to the spouse. But if you have children or other relatives, the surviving spouse may receive ½ or less depending on the number of children and/or relatives that are still around.

This is how separate property distribution works out under two scenarios: with spouse and without a spouse.

Property Distribution with No Spouse

Community and Separate Property Distribution with Surviving Spouse

Similar distribution models can take place when there are a spouse and other relatives that are not children.

For example, a person who has a spouse and surviving siblings but no children would have their separate property divided among the spouse and siblings. The spouse usually gets all community property and ⅓ of separate property. Children and other relatives like siblings and parents are only entitled to the decedent’s separate property. Grandchildren would also be included in these cases.

If You Want Your Wishes to be Honored, You Need to Plan

While dying without a will, or dying “intestate,” still means that your family members and spouse receive your property under the law, it may not always be the case. For example, even though your spouse may be entitled to community property, he or she still has to prove ownership.

It’s not difficult to see that things can become very complicated. But one thing is quite clear: when you don’t have a plan, you allow a government entity to take control of what you own. Most of us don’t want to let someone else make our decisions, but that’s exactly what happens when you don’t have a will.

Make sure you establish an estate plan that honors your wishes by speaking to an estate planning attorney who can help you devise an effective strategy. Still, have more questions?

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Whenever tax season kicks off into gear, many of us look for ways to reduce our tax liability. Some, but not all, attorney fees are eligible for deduction. It depends on the type of legal service you sought. For instance, hiring an attorney for a child custody dispute or a personal injury case are both ineligible expenses. Legal expenses related to a business, such as collecting unpaid debt, are qualifiable. 

Examples of Tax Deductible Legal Fees

Business-related expenses such as seeking advice for a startup business

Rental property expenses such as fees paid to evict a tenant

Employment discrimination cases

Examples of Non-Deductible Legal Fees

Personal injury cases including workers compensation

Criminal cases

Estate planning disputes

As they relate to estate planning, the IRS  will allow you to claim certain legal fees but not all. As you can see from the last example, legal costs relating to disputes between family members are not tax deductible. 

What Does the IRS Say about Deducting Legal Fees for Estate Planning

The IRS discusses Miscellaneous Deductions under Publication 529. Estate planning fees, including all other legal expenses, qualify under the miscellaneous category. 

For example, if you have a living trust that generates income, any legal fees associated with the maintenance and preservation of your trust are tax deductible. 

An example of an income generating trust would be one that includes rental property. Therefore, any legal fees associated with the management of your rental property are qualifiable. In addition, your trust may hold other non-real estate assets that generate income.

Examples of these would include:

Royalties paid to you

Businesses

Dividend-paying stocks

Certificates of Deposit (CDs)

Savings accounts

Legal fees you pay toward the preparation of filing taxes for a trust are also eligible for deduction. These fees could relate to collection or refund of estate taxes. 

Estate planning fees that are not tax deductible would be legal advice about the creation of a trust or issues that relate to the transfer of property. For example, if you seek legal advice that relates to transferring your residential home into a newly created trust as a way to avoid probate, this would qualify as a personal expense. 

Other estate planning instruments that don’t qualify for deductions would include healthcare directives, powers of attorney, and guardianship designations. 

How To Claim Your Estate Planning Legal Fees on Your Taxes

Attorney invoices include a list of services rendered throughout the course of service. You might get several invoices periodically, depending on the length of time you worked with your attorney. 

Some attorney services are tax deductible, while ones that are not are considered personal expenses. 

Your attorney can inform you about which services were related to taxes or for the management of income generating activities, such legal advice about your business. 

It also doesn’t hurt to double check with a tax professional about which of your legal expenses are tax deductible. 

You may claim your legal expenses on Schedule 1 Form 1040 as miscellaneous deductions. It is essential to point out that the IRS has a 2% rule on miscellaneous deductions, meaning that they will deduct 2% from your adjusted gross income.

All of your deductions on your tax returns count toward adjusting your total income.  For example, if your total gross income for the year totals $100,000 and the total amount of your deductions equal to $10,000, your adjusted gross income (AGI) is $90,000.

Now let’s assume that $3,000 of your miscellaneous deductions were all estate planning legal fees. The IRS would deduct 2% from your total AGI of $90,000, or $1800. This means you can deduct $1,200 of the $3,000 paid in legal fees ($3,000 – $1,800 = $1,200).

While not every legal fee you pay counts as an eligible deduction, the good news is that many of them can help ease your tax burden. This is good news for anyone concerned with how much they will have to pay an estate planning attorney in legal fees. 

Always consult with an attorney and tax professional about which expenses you can claim on your tax return.

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Understanding the terminology will help you with document preparation and for discussions with family members, your attorney, or anyone else involved in your plans.

Below, we have put together a list of commonly mentioned estate planning terms and definitions sorted by how they apply to the following categories:

Click on the category to jump to that section

People

Documents

Property

Taxes

Click Here for Complete List of Terms and Definitions A-Z

Terms and Definitions for People in Estate Planning

Administrator

An administrator is someone appointed by the court to represent an estate when there is no other document, like a will, that names an executor or any other individual to represent the estate. It can also occur in circumstances where an individual is unwilling to be a representative.

Attorney-In-Fact

This person is appointed through a Power of Attorney to handle another person’s property. An Attorney-In-Fact does not have to be an attorney, it can any person who is competent. Also, used interchangeably with Agent.

Beneficiary

The person (or entity) who receives assets from a living trust such as property, income, or other benefits. 

Conservator

A court-appointed individual designated to manage the property for someone who is incapacitated. It is similar to the role of a guardian to a minor. 

Decedent

A term used to refer to a deceased person. 

Executor

The person who is responsible for carrying out the instructions laid out in a will. An executor, unlike an administrator, is named in a will. 

Fiduciary 

A fiduciary can be either a person or an institution. A fiduciary is responsible for managing the assets of an estate planning instrument for the benefit of others. Executors and trustees can also act as fiduciaries. 

Grantor

A grantor is a person who creates a trust.

It is also used interchangeably with trustor, settlor, donor, and creator. 

Guardian 

A person (or institution) designated to handle decisions on behalf of a minor or an incapacitated person. 

Heir

An heir is a person who is entitled to inherit property or other valuable assets as defined by a state’s law. This term applies when there is no document, like a will or a trust, to designate such an individual. An heir is automatically entitled to receive a person’s property when there is no will or a trust. 

Although similar in meaning, an heir is not the same as a beneficiary. Beneficiaries can only be named in a will or a trust. 

Settlor

The person who creates the trust. Same as Grantor

Testator(male)/Testatrix (female)

The person who creates a will.

Trustee

A person or institution with the responsibility of managing trust assets and distributing them as laid out in its instructions. 

Trustor

Same as grantor and settlor

Terms and Definitions for Documents in Estate Planning

A/B Trusts

A Trust: A trust created for the sole purpose of a surviving spouse

B Trust: Also referred to as a “By-Pass Trust” is designated for the benefit of the grantor’s beneficiaries, which can also include the surviving spouse. However, when the surviving spouse dies, the remaining assets are awarded to the other beneficiaries, usually the children. B-Trust is also used interchangeably with the term Credit Shelter Trust.

Advance Medical Directive

Advance healthcare directives are legal documents that allow a person to nominate another individual to make critical medical decisions on their behalf. This person named in this directive is directly responsible for carrying out the other’s wishes, including matters of life or death. 

Learn more about advance healthcare directives here.

Beneficiary Designations

Beneficiary designations are usually included as part of other forms on bank or retirement accounts where a person gets to name beneficiaries for the assets in those accounts. 

Learn more about beneficiary designations here. 

Charitable Trust

A trust established for the benefit of a grantor’s charity. Note that all charitable trusts are irrevocable.

Charitable Lead Trust

This type of trust allows an individual to have income paid out to a charity for a specified number of years. After that term, the remaining funds are paid out to the named beneficiaries.

Charitable Remainder Trust

It is similar to a charitable lead trust, expect it pays out income to the named beneficiaries first and then pays out the charity. 

Learn more about charitable trusts here. 

Deed

Not to be confused with ‘title,’ a deed is the official document that lets you change ‘title’ for a piece of property, such as real estate or a car. The term, Title, refers to ownership of the item. 

For example: “Jane Doe is on the title for the house on Maple Street.”

Dynasty Trust

A trust that’s designed for a grantor’s wealth to be passed down over multiple generations. Dynasty trusts get to enjoy many special tax privileges. Also, used interchangeably with the term Legacy Trust. 

Learn more about dynasty trusts here. 

Durable Power of Attorney

This document allows a grantor to name another individual to make decisions on their behalf. Whereas a healthcare directive only applies to medical decisions, a Durable Power of Attorney extends to other matters such as critical financial decisions. 

Learn more about Durable Power of Attorney here. 

Family Trust

A trust set up for the benefit of a grantor’s family, such as spouse and children. Also, referred to as a B-Trust or a By-Pass Trust.

Irrevocable Trust

A trust that cannot be changed or altered once a grantor establishes it. It’s the opposite of a revocable trust. 

Irrevocable Life Insurance Trust (ILIT)

A special type of trust that lets a grantor transfer a life insurance policy into a living trust. 

Learn more about life insurance trusts here. 

Living Trust

A trust created during the grantor’s lifetime. The term ‘trust’ simply refers to the instrument that contains the grantor’s assets and property. 

Learn more about living trusts here. 

Pour-Over Will

A type of will that names the grantor’s trust as the will’s beneficiary. A Pour-Over Will is a way to address left-over personal property that may not have been included in a trust. A Pour-Over Will assures that this property is automatically transferred into the trust.

Learn more about pour-over wills here. 

Revocable Trust

A type of living trust that can be changed and amended during a grantor’s lifetime. A grantor can change named beneficiaries and make other modifications to it. It’s the opposite of an irrevocable living trust. 

Terms and Definitions that Relate to Property in Estate Planning

Assets

All items under your ownership, including real estate, bank accounts, insurance policies, retirement plans, investment accounts, and personal valuables like jewelry. 

Community Property

Applies to states that follow the Community Property rules. This rule applies to the state of California. Community Property refers to property that two spouses jointly acquire, such as a husband and wife purchasing a home together. Community property is divided equally among both spouses during a divorce or upon death. 

Estate

The estate includes assets and any debts that a deceased person left behind.

Joint Tenancy

Property owned by two or more people with rights of survivorship. 

Private Trust Company

A private family company established as a fiduciary to oversee trusts and estates for extended family members. Also, referred to as a Family Trust Company. 

Terms and Definitions for Taxes in Estate Planning

Annual Exclusion

A tax exclusion that allows an individual to give a certain amount on an annual basis without having to pay a gift tax. Currently, the annual exclusion amount is $15,000.

Estate Taxes

Federal and state taxes on assets left by a deceased person. Estate taxes are also referred to as death taxes or inheritance taxes. 

Generation-Skipping Transfer Tax (GST)

Federal taxes applied to transfers in a trust or gifts to beneficiaries from two or more generations from the grantor. For example, this tax would apply to the grandchildren of a grantor. This tax is applicable for any amounts over the GST tax exclusion. 

Gift Tax

A tax that is applied to transfer of assets from one person to another. Gift taxes apply to any amount over the gift tax exemption and any other applicable exclusions. 

Transfer Tax

Any taxes on transferred assets, such as estate, GST, and gift taxes.

Glossary of All Terms & Definitions

A-Trust

A trust created for the sole purpose of a surviving spouse

Administrator

An administrator is someone appointed by the court to represent an estate when there is no other document, like a will, that named an executor or any other individual to represent the estate. It can also occur in circumstances where an individual is unwilling to be a representative.

Advance Medical Directive

Advance healthcare directives are legal documents that allow a person to nominate another individual to make critical medical decisions on their behalf. This person named in this directive is directly responsible for carrying out the other’s wishes, including matters of life or death. 

Annual Exclusion

A tax exclusion that allows an individual to give a certain amount on an annual basis without having to pay a gift tax. Currently, the annual exclusion amount is $15,000.

Assets

All items under your ownership, including real estate, bank accounts, insurance policies, retirement plans, investment accounts, and personal valuables like jewelry. 

Attorney-In-Fact

This person is appointed through a Power of Attorney to handle another person’s property. An Attorney-In-Fact does not have to be an attorney. Also used interchangeably with Agent.

Beneficiary

The person (or entity) who receives assets from a living trust such as property, income, or other benefits. 

Beneficiary Designations

Beneficiary designations are usually included as part of other forms for bank and retirement accounts where a person gets to name beneficiaries for the assets in those accounts. 

Bypass Trust

Also referred to as a B-Trust or a Family Trust, it is designated for the benefit of the grantor’s beneficiaries, which can also include the surviving spouse. However, when the surviving spouse dies, the remaining assets are awarded to the other beneficiaries, usually the children. 

Charitable Trust

A trust established for the benefit of a grantor’s charity. Note that all charitable trusts are irrevocable.

Charitable Lead Trust

This type of trust allows an individual to have income paid out to a charity for a specified number of years. After that term, the remaining funds are paid out to the named beneficiaries.

Charitable Remainder Trust

It’s similar to a charitable lead trust, expect it pays out income to the named beneficiaries first and then pays out the charity. 

Community Property

Applies to states that follow the Community Property rules. This rule applies to the state of California. Community Property refers to property that two spouses jointly acquire, such as a husband and wife purchasing a home together. Community property is divided equally among both spouses during a divorce or upon death. 

Conservator

A court-appointed individual designated to manage the property for someone who is incapacitated. It is similar to the role of a guardian to a minor. 

Decedent

A term used to refer to a deceased person. 

Deed

Not to be confused with ‘title,’ a deed is the official document that lets you change ‘title’ for a piece of property, such as real estate or a car. The term, Title, refers to ownership of the item. 

For example: “Jane Doe is on the title for the house on Maple Street.”

Durable Power of Attorney

This document allows a grantor to name another individual to make decisions on their behalf. Whereas a healthcare directive only applies to medical decisions, a Durable Power of Attorney extends to other matters such as critical financial decisions. 

Dynasty Trust

A trust that’s designed for a grantor’s wealth to be passed down over multiple generations. Dynasty trusts get to enjoy many special tax privileges. Also, used interchangeably with the term Legacy Trust. 

Estate

The estate includes assets and any debts that a deceased person left behind.

Estate Taxes

Federal and state taxes on assets left by a deceased person. Estate taxes are also referred to as death taxes or inheritance taxes. 

Executor

The person who is responsible for carrying out the instructions laid out in a will. An executor, unlike an administrator, is named in a will. 

Family Trust

A trust set up for the benefit of a grantor’s family, such as spouse and children. Also, referred to as a B-Trust or a Bypass Trust.

Generation-Skipping Transfer Tax (GST)

Federal taxes applied to transfers in a trust or gifts to beneficiaries from two or more generations from the grantor. For example, this tax would apply to the grandchildren of a grantor. This tax is applicable for any amounts over the GST tax exclusion. 

Gift Tax

A tax that is applied to transfer of assets from one person to another. Gift taxes apply to any amount over the gift tax exemption and any other applicable exclusions. 

Grantor

A grantor is a person who creates a trust.

It is also used interchangeably with trustor, settlor, donor, and creator. 

Guardian 

A person (or institution) designated to handle decision on behalf of a minor or an incapacitated person. 

Heir

An heir is a person who is entitled to inherit property or other valuable assets as defined by a state’s law. This term applies when there is no document, like a will or a trust, to designate such an individual. An heir is automatically entitled to receive a person’s property when there is no will or a trust. 

Although similar in meaning, an heir is not the same as a beneficiary. Beneficiaries can only be named in a will or a trust. 

Irrevocable Trust

A trust that cannot be changed or altered once a grantor establishes it. It’s the opposite of a revocable trust. 

Irrevocable Life Insurance Trust (ILIT)

A special type of trust that lets a grantor transfer a life insurance policy into a living trust. 

Joint Tenancy

Property owned by two or more people with rights of survivorship. 

Living Trust

A trust created during the grantor’s lifetime. The term ‘trust’ simply refers to the instrument that contains the grantor’s assets and property. 

Pour-Over Will

A type of will that names the grantor’s trust as the will’s beneficiary. A Pour-Over Will is a way to address left-over personal property that may not have been included in a trust. A Pour-Over Will assures that this property is automatically transferred into the trust.

Private Trust Company

A private family company established as a fiduciary to oversee trusts and estates for extended family members. Also, referred to as a Family Trust Company. 

Revocable Trust

A type of living trust that can be changed and amended during a grantor’s lifetime. A grantor can change named beneficiaries and make other modifications to it. It’s the opposite of an irrevocable living trust. 

Settlor

The person who creates the trust. Same as Grantor.

Testator(male)/Testatrix (female)

The person who creates a will.

Trustee

A person or institution with the responsibility of managing trust assets and distributing them as laid out in its instructions. 

Trustor

Same as grantor and settlor

Transfer Tax

Any taxes on transferred assets, such as estate, GST, and gift taxes.

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美國移民局是負責管理美國移民系統的主要機構。在過去幾年，該機構面臨越來越多的壓力，處理積壓的公民身份、綠卡、簽證和其他移民申請。在 2020 年 5 月，美國移民局曾對外發出裁員消息，計畫在去年 8 月底裁減其約70%的員工。這是因為受到 COVID-19 疫情的影響，移民局在 2020 年的申請費用收入下滑，導致其面臨嚴重的財政短缺。好在美國眾議院在去年 8 月緊急通過了 H.R. 8089, Emergency Stopgap USCIS Stabilization Act （安定移民局緊急權宜法案），向美國移民局提供救急資金，才解決了該機構的裁員危機。Emergency Stopgap USCIS Stabilization Act 法案提出兩種方式來提高移民局的收入來源：

1. 提高加急審理的申請費用
2. 擴大加急審理服務的適用範圍

提高加急審理（Premium Processing）的申請費用

加急審理服務允許申請人支付額外的費用，以加快某些表格的裁決。通常移民局在 15 天內會給予答覆。加急審理服務目前適用於 I-129 表格（非移民身份申請）以及 I-140 表格（外籍工人的移民申請）。從 2020 年 10 月 19 日起，移民局宣布加急申請費將調漲，除了 H-2B 或 R-1 非移民申請人以外的所有申請，遞交 I-907 表格的加急申請費從 $1,440 調漲至 $2,500。申請 H-2B 或 R-1 非移民身份，遞交 I-129 表格的加急費用也從 $1,440 增加至 $1,500。除了申請費用的調整之外，移民局也將加急審理的處理時間從 15 個日曆日（calendar days）增加為 15 個工作日（business days）。

擴大加急審理服務的適用範圍

安定移民局緊急權宜法案也要求移民局擴大加急審理服務的適用範圍。目前加急審理服務只適用於部分 I-129 以及 I-140 的移民申請類型。其他如 EB1C、 EB2 NIW、EB5、 I-539 轉換非移民身份或是申請工作許可（工卡）目前都沒辦法要求加急。針對這些建議新增的申請類型，法案也設定相關的限制：

1. EB1C 和 EB2 NIW: 費用上限為 $2,500，審理時間不得超過 45 天。
2. I-539 申請轉換到 F, J, M 身分: 費用上限為 $1,750，審理時間不得超過 30 天。
3. I-539 申請轉換或延長 E, H, L, O, P, R 家屬身分: 費用上限為$1,750，審理時間不得超過 30 天。
4. I-765 申請工作許可證明: 費用上限為 $1,500，審理時間不得超過 30 天。

其他的建議改進措施

今年 3 月，美國移民律師協會（American Immigration Lawyers Association）與 16 個聯盟組織致信移民局，敦促移民局實施 Emergency Stopgap USCIS Stabilization Act 法案，已確保其能有效的裁定所有的申請並改善審理的時間。在信中，美國移民律師協會也進而提出以下11點建議改良方案：

1. 移民局應使用加急審理所收取的費用收入，優先解決移民局案件積壓的問題。尤其是對於當前還不符合適用加急審理服務的其他移民申請類型。
2. 移民局應確保常規申請的審理時間不會因加急審理服務的擴展而受到負面影響。
3. 加快工作許可申請以及身份轉換或延期的申請流程。
4. 擴大加急審理以包括 EB-2 NIW 或 EB1C。
5. 移民局應取消對常規案件的面試要求。
6. 移民局應恢復其「遵從」政策。遵從政策尊重並採取移民局過去所做出的裁決。例如，申請人曾透過同類型的移民申請通過審核，在遞交延期申請的過程中，若關鍵要素不變，而且沒有證據顯示任何的申請材料錯誤或是有詐欺行為的話，則移民官要尊重此前的決定。移民局在2017年取消的遵從政策。
7. 移民局應重複使用過去五年內所採樣的生物特徵信息（Biometrics），並免除 14 歲以下或 65 歲以上的個人以及之前已經過審查的申請人的生物特徵信息要求，例如 I-539 表格和入籍申請人。
8. 移民局應停止因表格填寫不完整或有空缺就拒絕申請。這個政策不但效率低，還提高移民局的成本。
9. 移民局應更明智地寄發補件（RFE）和拒絕意向通知（NOID）。
10. 即時兌現申請費並擴大在線申請選項，以加快移民局接受案件遞交申請的流程。
11. 移民局應盡量避免發佈新版本的表格，除非大眾要求並支持對表格當前的版本進行變更。

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