Estate Planning
With estate planning, it’s not about money. It’s about control. Control over whom you want to share in your estate. Control over whom you don’t want to share in your estate. Control over who will take care of you and look after your needs if you are unable to do so. Control over who will take care of your children if you are no longer around. When you have an estate plan, you have control.
With an estate plan, you can:
• Assign Someone to Make Decisions for You if You Can’t
With an estate plan, you can designate people to make decisions for you if you become incapacitated for any reason (such as from an injury or illness). You can designate someone to make decisions regarding financial and property matters (known as a durable power of attorney), or to make medical decisions (known as an Advance Health Care Directive in California). You can designate someone you trust to make these decisions in advance, and then rest assured that the matters will be taken care of if you are unable to take care of them yourself.
• Name Guardians for Minor Children
If you have minor children, an estate plan can be used to name a guardian if the minor’s parents are no longer living. This is important if you want to control the naming of a guardian, rather than rely on the court system to do so.
• Asset Protection
Estate plans can include provisions to protect assets from creditors. This is most often accomplished through establishing certain kinds of trusts.
Of course, an estate plan most commonly consists of tools for controlling who inherits your estate when you die. The creation of Wills and Trusts can control who may get specific items of sentimental value, and can also control who doesn’t get your estate.
•Wills
Wills are the most common thing people think of when they think of an estate plan. A will is used to designate who gets certain property when you die. Basically, you can designate any property you own in your own name, property that does not have a beneficiary designation (such as retirement accounts or life insurance policies), property held in a trust, or property held jointly with others (such property passes automatically to the other joint tenants when you die). This is known as “probate property” because it is property that is subject to the court’s probate process when you die. For more on probate, see below.
The will should also designate who will administer your estate when you die and is the document that names the person who will act as guardian of your minor children. Despite the trend toward establishing so-called “living trusts” as will substitutes (more on this below), and are still appropriate for some people. Wills are generally simpler to draft and change, and are often a better choice where the estate is very small.
The State Bar of California prepares a useful pamphlet on wills, which you can view here.
•Trusts
Trusts have become very popular in estate planning. Basically, a trust is an agreement involving the use and enjoyment of property for a period of time. A trust involves three parties: the creator of the trust (known as the “grantor,” “trustor” or “settlor”), the beneficiary of the trust, and the trustee, who administers the trust.
Certain trusts have become popular as will substitutes. These trusts are created and administered by the settlor for his or her own benefit during his or her lifetime, with designations of who will administer the trust and who will get the property when the settlor dies. This is known as a “living trust” or “revocable trust.” An advantage of a revocable trust over a will is that the property in the trust is transferred without having to go through probate (more on that below). Trusts are generally more complex and expensive to prepare than a will, and may not always the best method for controlling the disposition of an estate, particularly where the estate is small or there is little probate property. The State Bar of California also produces a pamphlet on living trusts, which you can view here.
Trusts can be designed to do many things other than substitute for a will. For example, a trust can be designed to minimize or defer estate taxes, to protect assets from creditors, to administer the assets of minors and those with special needs, and to hold assets for eventual passing to a charity. These types of trusts are generally quite complex and are not for everyone.
• Interested in Finding Out More?
This is a very general overview of the tools available for an estate plan. What your plan would look like depends on your financial situation and your family situation, among other things. Check out the State Bar of California’s pamphlet on Estate Planning by clicking here.
If you would like to find out more, or are interested in getting the estate planning process started, fill out the form on the Contacts page, or call me at (510) 500-4013.