Do I need an Estate Plan?

Most likely you need a plan.  The type of plan you choose should depend on your concerns and your goals.

Each family’s concerns are different.  Do you worry about who will take care of your children should you not be around?  If so, we need to nominate GUARDIANS for minor children.  Do you want to set up an education fund for your grandchildren?  If so, we need to take the necessary steps to create that type of plan.  Do you want to make sure that someone who would otherwise be entitled will not receive a share of your estate?  Certain steps should be taken to minimize the chance that such a person will be limited in his or her ability to make a claim against your estate or make themselves into a nuisance.

What are the Goals I should have when I prepare an estate plan?

Avoid Probate, Manage Assets, and Minimize or Avoid Taxes.

Avoid Probate: Probate is the name of the process whereby the Superior Court oversees the administration of someone’s estate after that person passes away.  Probate involves inventorying and appraising the property, paying debts and taxes, and distributing the remainder of the property according to the will or according to California law for a decedent who died without a will (intestate).  The process is time consuming, paper intensive, sometimes stressful, open to the public and very expensive.  Our first goal should be to avoid this process.

A simplified rule on when a probate will be needed: if a decedent owns real property in California or more than $100,000 in probatable assets, a probate will be needed to manage and transfer the estate.

The fee is calculated as follows:
Four percent on the first one hundred thousand dollars ($100,000), plus
Three percent on the next one hundred thousand dollars ($100,000), plus
Two percent on the next eight hundred thousand dollars ($800,000), plus
One percent on the next nine million dollars ($9,000,000).

Manage Assets: We should plan to manage assets in two different scenarios – (1) manage assets for your young beneficiaries and disabled beneficiaries, and (2) manage assets for the owner of the estate plan during incapacity or when they get older. 

(1) A good estate plan will manage a bequest for a young person until an appropriate age for distribution, like at age twenty-five.  A part of managing assets for a young person may include a provision to use the inherited resources for activities we want to encourage, such as education.  There is less likelihood that the bequest will be wasted.  Disabled beneficiaries may be best helped by using a “Special Needs Trust”.  The can provide some assistance to the disabled beneficiary while receiving governmental benefits and care without jeopardizing those benefits.

(2) An estate plan is the perfect tool to use to manage ones own assets during incapacity or when one arrives at an advanced age.  By preparing a proper estate plan, we are avoiding another Court process called conservatorship.  When an adult cannot take care of him or herself, or cannot manage his or her own money and assets (or both problems), the Superior Court an step in and appoint a person to have legal authority to make decision and manage money and assets for the incapacitated adult, similar to a guardian for a minor.  We would like to avoid this process for the same reasons we like to avoid probate, expense, time, and stress.

Minimize Taxes: For a married couple, a bypass or A-B trust can be used to preserve an exemption from the Federal Estate and Gift Tax for each spouse –effectively doubling our exemption from this tax.  Rather than having a single one-million dollar exemption, we can plan to secure an one-million dollar exemption for each.

What are the components of an estate plan?

Trust, Will, Power of Attorney, Advance Medical Directive

Trust:  Trust have many different names: revocable trust, living trust, family trust, inter vivos trust – they are all the same, do not be confused by the different titles.  A trust is a documents that holds title to assets so that the client does not technically have those assets in his or her name upon passing – thereby avoiding the probate process.  The owner of the trust still has authority and control over the assets, and also grants authority to others to manage and control the assets at a time of the owner’s incapacity or death.  Since the trust hold the assets, it can manage them for beneficiaries also.  The trust distributes the assets to the beneficiaries at a time or under the conditions specified by the owner of the trust.
• A trust can provide funds for your children and/or grandchildren’s support and education until they reach an age you determine.
• A trust can provide for your elderly parents if you should predecease them.
• Through a “Special Needs Trust”, you can care for your disabled heirs, allowing them comforts over what the state provides without interfering with their governmental benefits.
• With a trust, your assets will be distributed in days to your loved ones, rather than being frozen for years in probate.
A revocable trust ensures your family privacy.

Will: A will designates who will manage an estate after the owner passes and how assets will be distributed after death.  A will does not avoid the probate process, it becomes our instruction sheet for how the probate is to be managed and distributed.

Power of Attorney: A power of Attorney is a document in which you give legal authority to someone (your agent) to make decisions and handle your money, assets and personal business for you.  It can be effective as soon as your sign it or it can only be effective at a time you are incapacitated - your choice.

Advance Medical Directive: In this document, you specify who will be communication with the medical professionals and making personal care and medical decision for you at a time when you cannot communicate or make those decisions yourself.   You can direct the disposition of your remains after death and specify whether or not your with to make anatomical gifts.  There is a section where you can make end of life decisions – whether or not you wish to have life sustaining procedure or treatment in a terminal situation or when the patient is in an irreversible coma or persistent vegetative state.

What should I consider when making an estate plan?

ISSUES TO CONSIDER
WHO MAKES WHAT DECISIONS?
Trustee/Executor
Agent (Power of Attorney)
Agent (Medical Decisions)
Guardian for Minors
Conservator
TO WHOM AND WHEN WILL YOUR ESTATE BE DISTRIBUTED?
Beneficiaries:
(Spouse, Children, Grandchildren, Charities)

When:
(At what age or ages? Upon what events?)

Purposes:
(Education, Support, Special Needs)

YOU DECIDE WHAT HAPPENS DURING INCAPACITY

How are your assets to be managed?
(Trust and Power of Attorney)

Personal Care Decisions
(Trust, Power of Attorney &
Advance Medical Directive)

Life-Prolonging Treatment—Yes or No?
Anatomical Gifts—Yes or No?
Autopsy—Yes or No?
Disposition of Remains
(Advance Medical Directive)