1. What is Estate Planning?
  2. What are the benefits of an Estate Plan?
  3. What is involved with Estate Planning?
  4. What is a Will?
  5. What is a Pour Over Will?
  6. What is a Power of Attorney?
  7. What is an Advanced Healthcare Directive or Medical Powers of Attorney?
  8. What is a Living Trust?
  9. What are the Benefits of a Living Trust?
  10. I set up a living trust, now what?
  11. What is Probate?
  12. Why do I want to avoid probate?

 What is Estate Planning? Estate Planning is essentially the process of preserving and protecting your assets and property and then anticipating and arranging for them to be passed on to next generation in the most orderly manner possible

The main benefits of an estate plan are to preserve and grow your assets during life, eliminate uncertainties with respect to the disposition of assets at death, avoid probate, and maximize the value of your estate by reducing taxes and other expenses.

What is involved with Estate Planning?

  • Wills
  • Trusts
  • Beneficiary Designations
  • Powers of Attorney
  • Property Ownership
  • Gifting
  • Special provisions for minor children and loved ones with special needs. There are many other strategies and vehicles that are utilized for more sophisticated and high net worth estates.

What is a Will? A Will is utilized to provide for the distribution of assets at death. One of the most important parts of a Will is to name an executor who has the responsibility to collect and distribute assets and to administer your estate. Another important appointment of the Will is for the guardian of minor children. A Last Will & Testament by itself will not help you avoid probate as the Will is filed with the Probate Court after a loved one passes away. To avoid probate the Will must be a Pour Over Will.

What is a Pour Over Will? A Pour Over Will is a Will that names the Living Trust as the beneficiary of all of your assets. The assets are then distributed according to the terms of the Living Trust by your appointed Successor Trustee. There is no need for Probate because the Living Trust controls the assets.

What is a Power of Attorney? A Power of Attorney is an authorization to act on someone else’s behalf in a legal or business matter. A Durable Power of Attorney continues in place even if the Grantor becomes incapacitated. The Power of Attorney expires at death. When an estate plan is formulated most people choose to have a Durable Power of Attorney that is broad enough to invest a loved one or trusted friend with all the legal rights that the individual himself/herself has. In this way, if the person becomes mentally incapacitated, the loved one or trusted friend can take care of all of the legal and financial matters on behalf of the incapacitated grantor.

What is an Advanced Healthcare Directive or Medical Powers of Attorney? A Healthcare Directive or Medical Power of Attorney is utilized to enable the appointed agent to make medical decisions on behalf of the Grantor. Most of the time, when an individual is injured or suffers some sickness that requires hospitalization or medical care, a Medical Power of Attorney or a Medical Directive will be required by the medical provider. This is a necessity because the patient may become incapable of making decisions himself/herself and the agent then can step into the shoes of the patient and give authority to the medical provider to provide the medical treatment necessary. The Medical Directive is especially important in the event the Grantor becomes in a vegetated state or irreversible coma.

What is a Living Trust? A Living Trust is a legal document drafted by a qualified attorney that contains the Maker’s (the maker of the Trust is called the “Trustor”) instructions for disposing of his/her assets at death. Unlike a will, a Living Trust avoids probate, making the administration of an estate at death much simpler and uncomplicated for the heirs. A Living Trust is just like setting up your own family company that you control and that continues on past your death to carry out your dispositive wishes. The concept is very simple and avoids the expense and delay of court proceedings. You retain your control of the assets in the Trust because you are the manager or trustee of the Trust and you can do everything you could do before you placed the assets in the Trust (such as buy and sell assets, change or even cancel your Trust and you even file the same tax returns). Nothing changes with respect to the assets in the Trust but the names on the title.

What are the benefits of a Living Trust?

  • It avoids probate at death
  • It prevents court control of assets in case of incapacity
  • It provides maximum privacy
  • It can reduce or eliminate estate taxes
  • It can be changed or canceled at any time
  • It can protect dependents with special needs
  • It brings all of your assets together under one plan for a more orderly disposition.

A Living Trust, however, does not provide protection against creditors of the Trustor of the Trust. But it can provide protection against creditors of your heirs.

I set up a living trust, now what? Most of our clients choose to set up a Revocable Living Trust (“RLT”) as part of their basic estate plan. The RLT avoids the costs and time delays of probate, affords opportunities for estate tax savings and still gives the Trustors control over their assets.

However, setting up the RLT is not enough. In order for the Living Trust to be effective and carry out the instructions of the Trustors, it is important that the Trustor’s assets be re-titled into the name of the Trust. This is commonly referred to as “funding” your trust. This means you need to change titles from your name into the name of the Trust on real estate (by Deed recorded with the County Recorder’s Office) and other titled assets such as stocks, bank accounts, business interest and other investments. No one should have a Trust prepared without having their assets properly re-titled into the name of the Trust.

You need to also change most beneficiary designations to your Trustee. Re-titling assets into a Trust is commonly known as “Funding” a Trust.

In most instances, the same person or couple who make the Trust as Trustors also serve as Trustees. Therefore, the Trustors in their capacity as Trustees continue to control the assets in the Trust.

The reason why you need to properly fund the Trust is that if your assets are not held in the name of the Trust, you will not avoid probate in spite of the fact that you have set up the Trust. Think of the Trust as a basket. You need to place your assets inside the basket so that upon death the assets in the basket can be distributed according to the instructions of the Trust. Since the assets will be inside the basket, they do not have to be probated and your heirs will know what assets you own because they will be set forth on a schedule attached to the Trust. Almost all of your assets except your personal property like clothes, furniture and automobiles should be put inside your Trust.

What is Probate? When a close relative or friend dies, there are several important legal and taxation matters to be addressed. If the deceased person has a certain amount of property, you may need to initiate “Probate” proceedings.

“Probate” is the process whereby a Court supervises the transfer of assets from the deceased person to his or her heirs. Probate requires the filing of particularized and complicated legal forms, and the entire process is supervised by the Probate Department of the California Superior Court in the County in which the decedent resided at the time of death.

Why do I want to avoid Probate? The reason you want to avoid probate is due to the time commitment, cost of the process and publicity. The average probate case takes about 18 – 24 months to accomplish. All filings with the Probate Court are a matter of public record, meaning there is not privacy in a Probate case. The cost of probate is determined by statute and is as follows:

  $100,000 $8,000  
  $200,000 $14,000  
  $300,000 $18,000  
  $500,000 $26,000  
  $700,000 $34,000  
  $1,000,000 $46,000  
  $2,000,000 $66,000  
  $3,000,000 $86,000  

The fees listed above would be the total fees and would be split between the attorney and executor(s).

Example: A simple look at the chart of probate fees above indicates that even a modest estate needs a plan. For Example, an estate with nothing more than a home with a market value of $100,000, a mortgage of $86,000 and equity of $14,000 would result in nothing for the beneficiaries. The calculation is as follows:

Gross Market Value of Home $100,000
Minus Attorney’s Fee $4,000
Minus Executor’s Fee $4,000
Minus Home Mortgage $86,000
Minus Realtor’s Fee $6,000
Balance to Beneficiaries $0