California Wills & Trusts: October 2001 Summary

New Irrevocable Trusts Added

Four new choices of trusts have been added to the main menu of the California Irrevocable Trusts title (formerly called the "California Life Insurance Trusts" title):

• Annual Exclusion Trusts for Grandchildren
• Annual Exclusion Trusts for Children
• Qualified Personal Residence Trusts (QPRTs)
• Grantor Retained Annuity Trusts (GRATs)

The Annual Exclusion Trust choices will allow you to create a Crummey Trust or a Section 2503(c) Trust (also known as a "Trust for Minors") for one or more specified children or grandchildren. Separate trust shares will be created for each named child or grandchild. Each grandchild's trust will qualify as a Section 2642(c) Trust.

The QPRT and the GRAT are designed to qualify under I.R.C. §2702 and related regulations. The GRAT incorporates the Tax Court decision in Walton v. Commissioner, 115 T.C. No. 41 (December 22, 2000).

We have included four new Template files to facilitate the drafting of the new irrevocable trusts.

See the "How To" topic "Draft an Irrevocable Trust" in the Wills & Trusts title for a discussion of how to share answers when drafting an irrevocable trust and a revocable trust or stand-alone will for the same client. Questions 1, 82-97, 111, 160-168, 290-292, 312, 320, 341-343, 410-416, 420, 456 (IRT); 13 (Wills & Trusts)

Crummey Notices

To account for the addition of the new trusts, the choice for the Complex Single Crummey Notice now specifies that that type of Crummey Notice is appropriate only for use with an ILIT. In addition, if your answer file contains the name and gender of any Annual Exclusion Trust beneficiaries, that information will be used as the default information for the beneficiaries of any Crummey Notices. You may change the default information if appropriate. Questions 3, 485, 486 (IRT)

Additional Distributions

If you have indicated that you wish to give the trustee guidelines for distributing additional principal from a Residuary (Children) Trust or a Grandchildren Trust, the follow-up question now asks you to provide the age at which distributions "may" be made. Before this correction, the word "shall" was always used. Questions 494, 526 (Wills & Trusts); 259, 299 (IRT)

Maximum Adoption Age If you include a definition of adopted children in your document, you are asked for the maximum age for adoption by persons other than the settlor. There is now a minimum of "1" year for that answer. This change was made because some users mistakenly believed that entering "0" would eliminate the provision from the document. Questions 674 (Wills & Trusts); 435 (IRT)

No Contest Clause in Wife's Pour-Over Will

The correct gender references will now always appear in the No Contest Clause in a pour-over will. Before the change, if the client was a married couple, there was one place in the wife's pour-over will where the husband was mistakenly referred to as the wife. Questions 661, 1289 (Wills & Trusts)

Advance Health Care Directive

The first and last articles of the proprietary Advance Health Care Directive will no longer state that the directive is terminated by the principal's death. That language was considered confusing because it appeared to conflict with specific powers given to the agent to act after the principal's death.

Limited Power to Amend Rev. Proc. CRT

Every document drafted using the Rev. Proc. Charitable Remainder Trusts title will now correctly refer to the trustee's limited power of amendment. Before the change, the caption of the relevant paragraph mistakenly referred to a limited power of appointment.