What is an estate plan?
An estate plan includes a package of documents – Revocable Trust, Will, Durable Power
of Attorney, and Advance Health Care Directive. The Trust and Will ensure that your
property will pass to your intended beneficiaries, as quickly, easily, and inexpensively
as possible. The Durable Power of Attorney and Advance Health Care Directive authorize
your chosen agent to manage your financial and medical affairs during life, eliminating
the need to have a court appoint a conservator in the event you become incapacitated.
What is a revocable trust, and do I need one?
A Revocable Trust provides a vehicle for holding your assets so that your property
can be transferred to your beneficiaries without a costly, public, and lengthy court
proceeding (probate) when you die. After transferring property to your trust, you
continue to use and manage your assets as you have always done. A Revocable Trust
can be amended during your lifetime to incorporate changes in your circumstances
or in the law.
Do I need a will?
You need a Will, even if you have a Revocable Trust. The Will that is prepared along
with your Trust is referred to as a “Pour-Over” Will because it directs the executor
to distribute miscellaneous assets, such as your personal property, to the Trust.
Thus, the assets are poured over into your Trust and distributed according to the
instructions in that document. In addition, if you have minor children, the Will
nominates the person who will become their guardian if something happens to you.
If you do not have a Trust and the value of your estate exceeds $184,500, your estate
will have to be probated, even if you have a Will.
What is a durable power of attorney?
A Durable Power of Attorney nominates an agent who can take care of your immediate
financial needs if you are in an accident or become incapacitated. The document gives
your agent authority during your incapacity to pay bills, contact your insurance,
communicate with your employer, and carry on your business. A Durable Power of Attorney
is effective only during your life. In the event you become incapacitated and do
not have this important document, your spouse or children will have to petition the
court to be appointed as your conservator.
What is an advance health care directive?
The Advance Health Care Directive provides important instructions to your agent about
your end-of-life decisions. These instructions include your wishes regarding organ
donation, palliative care, and whether to artificially prolong life.
Do I need an estate plan if I don’t have a taxable estate?
Yes. If you die without a Revocable Trust and you have property valued at more than
$184,500, your estate will need to be probated, even if you have a will. Probate
is an expensive, lengthy, and public court proceeding. It often takes one year or
more to complete the probate process. As an example, if your gross estate is valued
at $1,000,000, your estate will pay up to $46,000 in probate fees. In addition, there
are court filing fees and publication costs.
If I am married and I die, doesn’t my estate automatically pass to my spouse?
Not necessarily. If you have separate property, your spouse will receive only a partial
interest in your property. Depending on how you hold title to your assets, your spouse
may still have to file a spousal property petition in the probate court to receive
your interest in the property you jointly own. Even if you are married, you need
an estate plan to ensure your spouse will not have to pay for an expensive court
proceeding upon your death.
Why should I hire a lawyer to prepare my estate plan when I can do it myself for less using an online product or service?
Nothing can replace the personal relationship you should have with your estate planning attorney. Your lawyer knows you, your family situation, your assets, and your goals. The estate plan your lawyer prepares will address your unique situation. A qualified estate planning attorney will know the right questions to ask, discuss the options available to you, and prepare documents tailored for your unique situation. Your attorney will provide important legal advice that will save you taxes during your life and at death. After the plan is complete, you should have a trusted adviser who will respond promptly to your questions and keep you informed of new changes in the law. In addition to creating the documents, your attorney will transfer your real property and business interests to your trust and help you properly title bank and investment accounts. Your lawyer will help you complete beneficiary designation forms for your retirement accounts and life insurance so that these assets are transferred to your beneficiaries as you desire, without the need for a court proceeding. If your trust is not properly funded, the money you spend purchasing an online product will be wasted because your assets will likely be subject to a probate court proceeding.
Will a trust protect me from creditors?
No. In California, you cannot avoid your creditors by transferring your assets to
a trust. You can, however, protect the assets you leave to your children from most
creditor’s claims if you leave your property to your children in a trust, and the
trust includes special provisions.
What is a special needs trust?
A Special Needs Trust holds assets for an individual who is permanently disabled
and wants to continue to receive public benefits. By transferring assets to a Special
Needs Trust, the money can be used to provide goods and services to a disabled individual
that he or she is not currently receiving without disqualifying that child from receiving
public benefits. Money in a Special Needs Trust may also be used to purchase a home
or automobile for a disabled individual receiving public benefits. If you have a
disabled child, your trust should state that, upon your death, property passing to
that child will be held in a Special Needs Trust.