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Estate planning is the term used to broadly describe the practice of preparing your estate to pass to your chosen beneficiaries upon your death and to allow for its management in the case of your incapacity prior to death. It also involves the nomination of guardians for your minor children and the preparation of assets and trusts to insure their financial security.
In our practice, revocable living trusts are the most common vehicle used for transferring assets and providing for the care of minor or disabled beneficiaries. For larger estates we employ more advanced techniques to protect against potential estate tax liability, including a variety of irrevocable trusts, family limited partnerships, private foundations and other gifting techniques. Smaller estates may only require a Will and powers of attorney, documents that are included in all of our estate planning packages. There is no individual or estate that cannot benefit from some form of estate planning.
ESTATE AND TRUST ADMINISTRATION
Estate administration, also known as a “probate proceeding,” and trust administration are the necessary processes of collecting and distributing your assets following your death. A probate proceeding is carried out in court with a judge overseeing the entire process and is necessary when a person dies without a will or trust or with only a will. The probate courts require that an attorney assist in the probate proceeding. Trust administration is the private alternative to the probate process and involves transferring control of trust assets to the Successor Trustee, at which time the Successor Trustee becomes responsible for notifying the beneficiaries of the death of the Settlor, collecting and accounting for the assets of the Trust Estate, paying the expenses of administration and taxes, and distributing the Trust Estate assets according to the terms of the trust agreement.
While it is not required by law that the Successor Trustee retain attorney assistance in the administration of a living trust, the administration is still highly regulated by IRS and California law and therefore the expertise of an experienced estate planning attorney is always strongly recommended.
A trust is an artificial entity that is able to become the owner of record on all of your assets. It is a bit like a corporation or LLC in that it is really just a bunch of paper that when signed and funded is able to own property. You, as the creator of the Trust, are able to designate who will manage the assets, who will benefit from the assets during your life and who will benefit upon your death. Trusts can be used to meet a multitude of needs and issues. The most common reason for creating a trust is to avoid the long and expensive probate process. A trust can also be used to protect assets from estate taxation, to make assets exempt from being included in the value of an estate for purposes of public benefits qualification, to make charitable gifts after your death, to limit the access to funds while insuring the ongoing care of a child or other beneficiary addicted to drugs or gambling or with heavy debt, and to make sure that beneficiaries and their creditors do not gain access to the funds until they are ready to responsibly manage them.
There are two basic types of Wills that we employ here at Anderson Estate Law- the “stand-alone Will” and the “pour-over Will.” The stand-alone Will works without a corresponding trust. It is the only document stating your wishes for the disposition of your assets, appointing the Executor of your estate and often appointing guardians for your minor children. The stand-alone Will is in essence a letter to a judge, because the estates of those who pass away with only a Will or with nothing at all must go through probate. We recommend stand-alone Wills only to those with estates with a gross value of under $100,000.
The other type of Will- the pour-over Will- is a document that is created to work in conjunction with a revocable living trust. The pour-over Will lists the revocable living trust as the beneficiary of the estate assets and acts only as a “safety net” to ensure that any assets not properly funded into the trust prior to the death of the Settlor are brought into the trust following the Settlor’s death. The terms for disposition are then found in the revocable living trust.
Probate is the court process of administering a decedent’s estate. If the decedent has a Will, then the Will is submitted to the court for probate, usually by the nominated Executor. The judge then orders the probate process to be opened and officially appoints the Executor to serve. The Executor is then responsible for collecting the assets of the estate, identifying and paying off creditors, accounting to the beneficiaries and finally distributing the assets to the beneficiaries named in the Will. If a decedent dies without a Will, the court will appoint a qualified party to serve and will order distribution according to the provisions contained in the probate code for “intestate distribution.”
Estate planning is typically designed in part to avoid the probate process because of the increased time, expense and supervision that probate requires compared to the administration of a trust.
This is the court process of appointing guardians for a minor child. The court will appoint a person to serve as guardian of the person of a minor child, and will also appoint a person to serve as guardian of the estate of a minor child. The guardians are responsible for accounting to the court regarding the status of the guardianship at least annually.
Charitable giving is incorporated into estate planning in several ways. The simplest form of charitable planning is including charitable organizations into the dispositive provisions of your trust or will. Charitable planning becomes more complicated when a client wishes to use charitable giving to avoid estate taxation. There are several different charitable trusts and trust provisions that can be employed to accomplish legitimate tax avoidance. If you are interested in charitable gifting at your death and/or feel that charitable gifting is how you would prefer to limit the value of your estate for estate tax purposes, feel free to contact us to discuss your options.
SPECIAL NEEDS PLANNING
Disabled or elderly beneficiaries accepting public benefits from the State or Federal government can lose their qualification for these benefits if the receipt of an inheritance or other gift raises the value of their estate above the level for qualification. In order to make sure that the receipt of a gift will not disqualify a disabled beneficiary from receiving public benefits, the law allows for the creation of “special needs trusts.” These trusts allow a Trustee to hold assets for the benefit of the disabled beneficiary and to distribute income and principal for items and in the amounts that will allow the beneficiary to live more comfortably but still not lose their eligibility.Special needs trusts can be created and funded prior to the death of the Settlor, or can be incorporated into a revocable living trust to be funded at the Settlor’s death.
POWERS OF ATTORNEY
The term “power of attorney” refers to giving another person the power to represent your interests and sign on your behalf during any period of your incapacity. It is a part of any comprehensive estate plan in that it provides for the management of any non-trust assets and day-to-day bill paying activities while you are incapacitated. There are two basic types of powers of attorney: the general power of attorney and the durable power of attorney. The general power of attorney expires upon the incapacity of the principal. It is typically used for short-term purposes, for instance in order to give a spouse power to sign on your behalf while you travel.
The durable power of attorney, on the other hand, is more commonly used in estate planning because it survives the incapacity of the principal (hence the word “durable”). We include and incorporate a durable power of attorney into all of our estate plans.
ADVANCE HEALTH CARE DIRECTIVE
This document is the modern California law form of the durable power of attorney for health care and living will. The purpose of the advance health care directive is found in the title- giving directions concerning your health care wishes in advance. This form appoints your agent to make health care decisions and instructs the agent and the attending physician what life-saving health care measures you do and do not wish to receive in the event that you are unable to capably give these instructions.
LEAVE A LEGACY
Leaving a Legacy
The Ultimate Gift
Many people think that legacy is about money, but it really has nothing to do with money at all. Legacy is about life. It’s about the here and now. It is about behavior. It’s about how we live in this world rather than how we leave it. And to be intentional about our legacy, we must know our purpose. What are we here for? How are we impacting the world? What values are we passing to our children? What life stories should be documented? What is the texture of our family culture? And most importantly, how can it be captured for future generations? Our legacy is the most important asset we can pass on. A recent study found that non-financial items that parents leave behind, such as wisdom, life lessons, stories, values, morals, and faith are ten times more important to both baby boomers and their parents than financial inheritance. The question is, how can we pass this non-financial wealth to our children and later generations? There is an old saying that goes something like this: When one of us dies without sharing our lessons, insights, stories and wisdom, it’s as if an entire library has burned down. When we meet, we’ll discuss the legacy aspect of your Estate Plan.