Estate Planning FAQs
Frequently Asked Questions
Q: Why is a living trust so important?
A: A living trust can be a valuable tool for saving time, money, emotional trauma and headaches for those who assume control of your estate after you die. At the same time, a living trust keeps you in complete control of your affairs while you are still alive.
With a living trust, you can achieve continuous planning:
- Avoid an expensive, lengthy and public probate process.
- Stay in control of your assets during your lifetime.
- Specify precisely how you want your property distributed upon your death.
- Have peace of mind knowing your surviving spouse has an estate plan in place.
- Enjoy the flexibility to update your trust throughout your lifetime.
- Retain the same tax filing status as you currently have without additional taxes or paperwork requirements.
- Assign a trusted agent to take over as trustee if you become incapacitated, while you remain the sole trust beneficiary.
Despite all these advantages, a living trust may not be appropriate for everyone. In particular, estates with a probate estate of $150,000 or less in gross fair market value, or community property that is passing only to a surviving spouse may not see the benefits of a living trust. Our office can help you decide whether a living trust is right for you.
Q: What does an estate plan consist of?
A: An estate plan has four cornerstone documents, with a number of important ancillary documents: a will, living trust, financial durable power of attorney and advance healthcare directive.
Your will designates how your property will be distributed after your death and who will take care of your minor children (if your spouse is no longer living). If you die without a will, the state of California writes a will for you and leaves your property to your family according to a certain percentage formula, which you may not agree with. Most people don’t like the plan dictated by the government. By executing a will, you can give your property to whomever you like (subject to community property rules), state your final wishes, exercise powers of appointment in trusts where you are the beneficiary, and set up a trust for the benefit of your heirs. A will can also be used to “pour over” property into your living trust to be distributed according to the trust’s provisions.
A living trust holds legal title to your property during your life, keeping it out of your “estate” that goes through probate after you die. Each living trust has a plan of distribution that in most cases can be implemented with greater ease and lower cost than a probated estate. By avoiding probate, your heirs will be spared the long, expensive, open-to-the-public probate process. At the same time, a living trust gives you tremendous flexibility in providing long-term, tax-free gifts to your family, beneficiaries, and charities. Your assets tucked inside your living trust will be distributed efficiently without court intervention or supervision. Even if you forget to transfer something into your living trust, your executor can use the probate-by-affidavit procedure to circumvent full probate (with its costs and delays) for combined assets of $100,000 or less in value. In this way, the living trust is really the cornerstone of your estate plan.
A living trust can have the following features:
- Divide into multiple trusts at your death to support your spouse, provide for your kids, and support your local charities.
- Provide financial support to multiple generations—your spouse, children, and even grandchildren.
- Have a gifting mechanisms for safely and legally avoiding estate and generation-skipping taxation.
- Provide for named successor trustees to manage and distribute trust assets.
- Create a “special needs trust” to support a disabled loved one without endangering his or her government entitlement benefits (SSI, SSDI, Medi-Cal/Medicaid, Medicare, CalWORKS, Social Security).
- Grant special trustee powers and powers of appointment to your loved ones to adjust trust distributions and beneficiaries in light of changed circumstances and needs.
Financial Durable Power of Attorney
A durable power of attorney appoints someone to act in your place in your personal financial or business affairs if you are incapacitated. Called a “springing” power of attorney (because it springs into action only if you become incapable of managing your affairs), the document can be outfitted with the specific powers you wish to transfer to your agent, called your “attorney in fact.” Typically, those powers include the power to sign checks, pay bills, open and close financial accounts, handle tax matters, sell property, and manage retirement plans. This can be an extremely useful tool for providing continuity in managing your affairs when you are unable to personally handle these matters due to injury or illness.
Advanced Health Directive
Your advance health care directive (called a living will or durable power of attorney for healthcare outside of California) appoints the person you want to be in charge of your medical treatment decisions when you cannot speak for yourself. You can express your wishes for or against certain types of medical treatment or procedures. You can express your wishes regarding life-prolonging treatment when you are in a terminal and unconscious condition. The bottom line is that you will provide your family with a road map of your wishes so that they feel confident about doing the right thing with your medical treatment.
Q: When should I revisit my estate plan from many years ago?
A: Although an estate plan usually covers future events and anticipated family changes, it’s important to review your plan from time to time to make sure it meets your current needs. A simple trust amendment may be needed, or a new healthcare agent may need to be appointed. We can handle all these simple changes on a flat fee. More numerous or complicated changes may require a new document or, in some cases, all-new documents. Circumstances that require further legal counsel include:
- Dramatic changes in asset types or total estate value,
- Changes in intended beneficiaries,
- Changes in intended successor trustees or personal representatives,
- Death or divorce of a settlor/trustor, trustee, or beneficiary, or
- Changes in the tax laws.
Frequently Asked Questions
- Why is a living trust so important?
- What does an estate plan consist of?
- When should I revisit my estate plan from many years ago?