What will happen to the property I own when I die?
Just what is Estate Planning?
Estate Planning can be as simple or as complex as your situation demands.
- For a young couple in good health, a Will usually is enough.
- A middle aged couple might want to consider Retirement Planning.
- To insure your health care decisions are honored, consider an Advance Health Care Directive and HIPAA authorization so that your loved ones can help you carry out your health care wishes.
- For privacy and to ensure immediate access to your funds, you should consider a Living Trust.
What is a will?
A will is a basic estate planning document and is an instruction normally carried out by a person known as an “executor” a person entrusted to carry out the instructions after one’s death. These usually are matters regarding the division of property and assets, how they are to be divided and distributed and also to make sure your wishes are followed in the disposal of your remains. A will may name who is to have guardianship of your minor children if neither parent is alive, and how and when your estate will be distributed to heirs who are not yet adults.
What are the advantages and disadvantages to a will?
The advantage of a will is that all of your wishes left as instruction in the will, will take effect after your death and are not effective until your death. You are free to make amendments to the document.
The disadvantage of a will is that the instructions are usually carried out under the supervision of the Superior Court, during a process called probate, which, in California, takes at least six months. This means that the distribution of your property and assets is not possible before the initial six months unless there is dire need.
What is a Durable Power of Attorney?
A Durable Power of Attorney allows an individual - the “Principal” or “Grantor” - to authorize another person the “Attorney-in-fact” or “Agent” to act on his or her behalf. There are Durable Powers of Attorney that are effective immediately and stay in effect if the Principal becomes disabled or incapacitated, as well as those that become effective only upon the Grantor's disability or incapacity.
What is an Advance Health Care Directive?
This is a document which allows your wishes to be known if you are unable to state them. A patient’s desire to not be kept alive by extraordinary means, such as machines and crippling operations, or not to be subjected to certain drugs and their side effects will not be honored unless these are communicated to hospital staff, by the person himself unless there is an Advance Health Care Directive.
The Advance Health Care Directive can cover such issues as what medical procedures or tests you want to be used or not used, who your health care providers are, whether you wish your organs donated and what extraordinary means you wish to use in the event of a terminal condition, to name a few.
What is a trust?
When an individual or a couple (Grantors) legally transfers property to someone they trust (Trustee) for the benefit of others, this is a trust.
There are two types of trusts revocable and irrevocable.
With a revocable trust, the Grantor has the right to remove any of the assets transferred to the trust. Even though the assets are transferred, they are still under the grantor's control. This is also known as a “living” or “family” trust, as it is family oriented. If set up by a couple, they are changeable so long as both are still alive. If a single person sets up a trust, it is revocable until he or she passes away.
With an irrevocable trust, once the property is transferred into the trust, the Grantor cannot get it back.
What is a will contest?
There are occasions where family members are concerned about the validity of a will or the administration of a trust. Challenges are handled by a probate court and must be filed in a probate court. Disputes over the improper execution of a will or trust or improperly drafted documents are all occasion for will contests.
What is the difference between a living trust and a will?
Often an attorney is asked whether someone should write a will or prepare a living trust. Usually, an individual or couple still in the “asset aquisition” phase of their life, involved in a career or business, should write wills to cover the unlikely event of an untimely death.
More mature individuals or couples who have retired, have the time to consider more detailed estate planning. At this time in their lives, income is earned from retirement, Social Security, and the assets accumulated over a lifetime of careful investment. A living trust, in these circumstances, is a more appropriate instrument around which to organize a detailed estate plan, allowing complete control over all assets, but allowing for continued management of these assets, even in the event of death or incapacity. A living trust can also preserve the privacy of those with substanial assets, since the assets are usually not subject to the probate process. Starting the estate planning process can save hundreds of thousands of dollars in unnecessary estate taxes if the proper steps are taken.
Why should probate be avoided?
Why should probate be avoided? Probate is a time consuming, public and expensive process. In California, a probate takes a minimum of 6 months to complete, with the average probate taking up to a year. If this much delay in distribution of the estate assets will not inconvenience the heirs, then probate can serve a very useful purpose of providing a legal bar to further claims against the estate.
However, the heirs may want a more prompt distribution, and this is only possible if there is a living trust in place, with the bulk of the estate assets in it. Further, all probate documents filed with the court become a public record, a circumstance which many families wish to avoid.
Probate can be very expensive when compared to the cost of setting up a living trust and doing estate planning. Attorney and executor fees are set by statute, and an estate of $500,000 can amass $25,000 or more in attorney and executor fees.