Estate Planning
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Estate Planning
Estate planning is a process. It involves people - your family, other individuals and in many cases charitable organizations of your choice. It also involves your assets and all the various forms of ownership and title that those assets may take.
As you plan your estate, you will consider:
- How your assets will be managed for your benefit if you are unable to do so
- When certain assets will be transferred to others, either during your lifetime, at your death, or sometime after your death
- To whom those assets will pass
Estate planning also addresses your welfare and needs, planning for your own personal and health care if you are no longer able to care for yourself. Like many people, you may at first think that estate planning is simply the writing of a will. But it encompasses much more. Estate planning may involve financial, tax, medical and business planning. A will or trust is just one part of that planning process, but other documents are needed to fully address your estate planning needs.
Estate planning is also a dynamic process. Just as people, assets and laws change, it may well be necessary to adjust your estate plan every so often to reflect those changes.
There is an unfortunate, widespread misconception that Estate Planning is a subject of interest only to the wealthy. In fact, an estate plan provides the legal mechanism for disposing of property upon death in a way that recognizes your wishes and the needs of your survivors, while minimizing taxes. For many it involves, even more importantly, planning for the handling of affairs in case of disability, and the deeply personal medical choices to be made as life nears its end. Estate planning can benefit nearly everyone.
Wills & Trust
Both Wills and Trusts are devices you can use to provide
for the distribution of your estate upon your death. Deciding whether a Will or
a Trust best fits your needs depends on your circumstances.
A Living Trust is a popular alternative to the traditional
Will, but you should weigh the advantages and disadvantages of each before
deciding on one form or the other.
|
WILLS |
LIVING TRUST |
|
|
PROBATE |
Subject to probate proceedings. Out -of-state property requires probate proceedings in
that state, as well. Provides court supervision for handling beneficiary
challenges and creditor disputes. Becomes public record at the time of your death. |
Not subject to probate proceedings. Avoids
the cost of a second-state probate proceeding where there is out-of-state property. No
automatic court supervision to deal with disputes.
Remains
private.
|
|
TAX SAVINGS |
Same tax
saving provisions available in both. |
|
|
MANAGING ASSETS |
In addition to the Will, must use a Power of Attorney or
Conservatorship to manage assets |
Allows you as the grantor to manage the Trust assets as
long as you are willing and able. Makes provisions for a successor trustee to take over in
your place. |
|
COSTS |
Costs less to prepare a Will than a Trust, though cost to
probate a Will can be substantial. |
Costs more to prepare, fund and manage a Trust than to
prepare a Will. But avoids probate costs if all assets were held by the
Trust. |
When deciding between a Will and a Trust, it is advisable to consult a reputable attorney. An experienced Estate Planning attorney will be able to advise you on the many factors to consider, and help you decide which approach is right for you.
Living Trust
Most clients can benefit by creating a living trust, rather than
relying upon use of a simple Will.
A Living Trust – also known as a Revocable Trust (a trust you can modify or revoke at any time) - is a
legal entity that is separate from you as an individual. You transfer title of your
major assets to this trust — like your house and your brokerage accounts.
During your life, you - and your spouse, if applicable - serve as the trustees
of the trust, which gives you the power to buy, sell, and otherwise transfer
any of the assets in it. When both of
you die, the assets in the trust are transferred to the beneficiaries of the
trust, usually your children, without going through probate at all.
A revocable Living Trust also ensures that your financial affairs
will be taken care of in the manner you choose, in the event of your impairment
due to a serious illness or accident.
Though it costs some money up front to set up a Living Trust, and
takes some time to manage, it costs much less than what the probate process could cost your estate.
Family Trust
A Family Trust is simply a special trust set up to benefit members of your family.
The purpose of the Family Trust is for you to progressively
transfer your assets to the trust, so that legally you own no assets yourself,
but for you, through the trust, to still have some control over, and get the
benefit of, these assets. Assets in a
trust can include any type of property interest including investments, shares
of private companies, principal residences, bare land, vacation homes, and
family heirlooms.
You can set up a family trust either while you are still alive (by
a declaration of trust contained in a trust deed) or when you die (by the terms
of your will).
The trust is established
when you contribute “property” to the trust. The contributor is referred to as
the "settler". The person who receives the property and manages the
trust is referred to as the “trustee”. The trustee can be a family member or a
trusted relative or friend. It can also
be a trust company or any combination of persons.
The trustee holds the property in trust for one or more
“beneficiaries”. These beneficiaries can consist of any person, a charity and
even unborn children. For example, you can set up a trust today that includes
all future grandchildren as beneficiaries even though you have no grandchildren
right now.
Add to this flexibility the fact that you can be the settler, the
trustee and a beneficiary of your family trust, and there is virtually
unlimited potential to design a trust that meets your particular family
needs.
As with any important legal document, you should
obtain competent legal advice before setting up a trust. Your attorney will
assist you with, not only fully understanding all the benefits and
responsibilities of your trust, but also drawing up the principal document to
ensure that all legal requirements are met.
Probate
Probate is where a decedent’s final debts are settled,
and legal title to property is formally passed from the decedent to his/her
heirs. It is initiated in the county of the decedent's legal residence at time
of death. Usually, the first step is taken by the person named as Executor, or
other interested party who has the original Will.
This person needs to file a Petition for Probate of
Will and Appointment of Executor. If there is no Will, someone must come
forward and ask the court to be appointed as Administrator, instead of an Executor.
Most often, this is the surviving spouse or an adult child or someone who would be the right person to manage and distribute the decedent's estate. It could be a family member or a good friend.
After the document's genuineness and validity are
established, the court issues an order "admitting the Will to
probate." It is then recorded by
the County Clerk. Usually, this is a routine matter. Occasionally, however,
there might be an objection, which would then have to be resolved by the
courts. For example, somebody might
claim that the document being offered to the court is actually a forgery or out
of date. Whatever the objection or
claim, it must be brought to the court’s attention.
Once the Will is admitted to probate, the process
involves three basic steps:
1.
Collection, inventory and appraisal of all assets that are subject to
probate;
2.
Payment of taxes and creditors;
3.
Formal transfer of estate property according to the Will, or by the
state laws of intestate succession, if there is no Will.
California Probate Law is not overly complicated
but it does involve a good deal of paperwork that must be filed in a timely
manner. There will be court hearings involved as well through this process.
Succession Law
If any part of a decedent's estate is not effectively disposed of
by a will, the “intestate” (not covered by will) share will be distributed, by
California Law, in the following order and manner:
- Surviving spouse. A surviving spouse is generally first in line to
get any assets from the intestate estate, including both separate property
and the one-half of community property that belongs to the decedent.
- Heirs other than surviving spouse. Any part of the intestate estate
not passing to the surviving spouse as indicated above, or the entire
intestate estate if there is no surviving spouse, passes as follows (this
is a partial list only):
· Decedent's descendants (e.g., children and grandchildren).
·
Decedent's surviving parent or parents equally.
·
Siblings, split equally if they are all of the same degree
of kinship to the decedent.
·
Decedent's surviving grandparent or grandparents equally.
- State of California. If there is no taker under any of the above provisions, the intestate estate reverts to the state of California.
- Sometimes it may be necessary to retain the services of a a heir locator to find any descendants of the decedent in order to bequeath the decedent's assets.