When considering your estate planning, there are some basic documents that you may want to familiarize yourself with first. A qualified attorney can focus your thinking even further and he or she can let you know if other documents are necessary for your situation. As you will see, proper estate planning allows for dealing with incapacity problems during your lifetime as well as distributing one’s assets at death. This is important to consider because the transfer of wealth is often secondary to providing an explanation of your desires to your loved ones in the event you are alive but incapacitated.
Please give some consideration to what you want to accomplish with these documents so that down the road, you are sure that the finished product satisfies your needs.
Although other legal documents and techniques may be applicable to your individual situation, we’ve provided some information regarding some common estate planning documents for your convenience.
TRUSTS & PROBATE
The most common question I get is “Do I need a Trust?” Trusts avoid the probate process and allow for a quicker and cheaper transfer of your wealth to your desired beneficiaries. Contrary to popular belief, having a Will does NOT avoid probate and is often no better than not having a Will at all. (For instance, if you were single and going to give everything to your children in equal shares, that distribution would occur without the Will as a result of California’s intestate succession rules. Wills do serve other potential functions as discussed below).
A Trust (also known as a “revocable living Trust”) identifies the Trustor (the person setting up the Trust), a Trustee (the person who manages the Trust according to his terms) and beneficiaries (the people who stand to inherit the Trust assets when you’re deceased). Most Trusts remain under the Trustor’s complete control during his or her lifetime and the Trustor also serves as the Trustee as long as he or she has capacity. The Trust may be amended during the Trustor’s lifetime to accommodate changes needed in the planning (ie: minor children having grown into adults).
A Trust transfers assets to your beneficiaries directly (from the Trustee) without the expensive and time-consuming oversight by the Courts. Trusts usually save beneficiaries a lot of money in attorneys and Executor fees as well. A $1,000,000 probate estate at the statutory fee rate in California would require paying an attorney $23,000 and the Executor $23,000. That $46,000 is far above what it would cost to transfer a $1,000,000 through your Trust down to your desired beneficiaries.
Also, the Trust allows for someone to step in and manage your Trust assets during your lifetime as well. That way, if you start to run into dementia issues later in life, your loved ones don’t have to get a formal Conservatorship for you in order to step in and manage your affairs.
Again, a Trust isn’t always the proper fit so you should contact an attorney to learn more about whether a Trust is appropriate for your circumstances.
A Will is a document that identifies your Executor (the person who manages your estate upon your death), a Guardian (the person who would raise your children in the event you’re deceased while they’re still minors) and your Beneficiaries (the people who stand to inherit your estate assets). A Will does NOT avoid the probate process and so a Court would oversee the administration of your estate if you died with a Will and you had over $184,500 of assets titled in your name alone in 2023. (Note that joint tenancy and community property with right of survivorship assets like your home you own with a spouse, accounts with pay-on-death beneficiaries, retirement accounts with designated beneficiaries and beneficiaries on life insurance policies would NOT be subject to probate as these are “non-probate” transfers not subject to the terms of your Will usually).
If you decide to get a Trust package, you’re going to get a “pour-over Will” identifying your Executor, any Guardian (if necessary to protect minor children) and the beneficiaries of your estate. Typically, this means your estate is distributed to your Trust to follow the distribution therein when you’re deceased. It’s important to note that your Will is ONLY valid when you’re deceased and has no effect during your lifetime.
General Power of Attorney
A typical Trust package is going to consist of a Trust, Will and Powers of Attorney. One Power of Attorney is a General Power of Attorney. This document names an Agent to carry out non-Trust financial affairs for you in the event that you are alive but can’t do so yourself.
You might not think you need this form if most of your assets are going to be in the Trust. However, the Trustee has no power over some of your assets, including retirement plans and life insurance and has no authority to sign income tax returns if you can’t do so yourself. This form authorizes those tasks to be covered as well as many others. Even people who may not have a need for a Trust should consider getting a power of attorney in place so that someone can manage his or her finances in the event of incapacity.
This is the document by which you set out your wishes regarding your health care and name an Agent to make health care decisions for you if you can’t make them for yourself. This is a combination form - it names the Agents and sets out their addresses and phone numbers and gives the Agent rather broad powers concerning your care, including place of residence, companionship, care givers, etc. It then sets out your intentions concerning pulling the plug, pain relief, autopsy, anatomical gifts and disposal of remains. Again, any adult should consider getting this form completed so that his or her wishes are expressly stated in the event of an emergency. Don’t hesitate to contact us for information on how this document works.
To learn more about how Wiggins and Ebert can assist you with Estate Planning, Trust Administration and Probate matters, please contact us here. For anyone interested in setting up their own estate plan consisting of a Trust, Will and Powers of Attorney, you can link to our questionnaire here.