In CA, when the first spouse dies, 50% of the undivided community real estate is to be placed into an Exemption Trust and the excess, if any, into the Marital Trust, with 3.5 million going into the Exemption Trust (current fed exemption amount allowed). The other 50% of the community property goes into the Survivors Trust which is revocable by the Survivor. The primary purpose for all the Trusts is to guarantee the health, maintenance etc of the surviving spouse. Everyone wants to avoid probate, hiring attorneys, etc., for now, everyone is working together to save money.
As I understand this, upon death of the first spouse, the Exemption Trust becomes irrevocable, as does the Marital Trust. It appears that the language of the Living Trust allows for the Trustee to determine which real properties will be placed into the various Trusts in order to obtain maximum federal exemptions, and provide for the needs of the Survivor, etc. Question: Since the Exemption Trust is irrevocable, if the Trustee is “certain" that there is more than sufficient funds to take care of the Survivor Health, etc, can the Trustee distribute to any of the heirs all or part of the real property and/or other assets in Exemption Trust at any time, with or without the permission of the Survivor? If not, what if the Survivor does not have capacity to act? Or is it typical that there is no distribution to any of the heirs until the Survivor dies and all matters are wrapped up before distribution of any of the assets to the heirs.