Estate Planning

What is Estate Planning?

 

Estate planning is where you make decisions for two phases of your life.  First, if you become incapacitated, meaning that you cannot make decisions for yourself anymore, you make decisions regarding who you want to make financial, legal, and medical decisions for you.  Second, when you pass away, you make decisions regarding who is going to manage your assets, who is going to inherit your estate, and how.  All of this is done through documents such as a will, living trust, durable power of attorney, an advanced healthcare directive, and a healthcare power of attorney.

 

What is Probate?

 

Probate is a process where, depending on the size of your estate, a judge in Probate Court will decide who inherits your assets.  This is a lengthy, time-consuming, and very expensive process.  If you do not have a Will, the judge will distribute your assets pursuant to the laws of Intestacy.  What this means is your spouse, then children will receive your assets.  If you do not have children, the Court looks to the following list of family members:  your parents, siblings, nieces and nephews, and so on.  You can override the state of California’s Intestacy Laws with a Will or a Trust.

 

What is an Estate?

 

An estate is what you leave behind when you pass away if you do not have a trust or beneficiaries on your account.  People confuse the term estate with everything you leave behind.  This is not so, in fact, someone can pass away with millions of dollars and still not leave an estate. If you do leave an estate when you pass, the State of California has Intestacy Laws that dictate where your assets go. 

 

What is a Will?

 

A Will, or Last Will and Testament, is a document you sign that states where you want your assets to go when you pass away, who is going to care for your minor children, and directs the disposition of your remains (meaning cremation or burial).  A Will does not avoid Probate. This is one of the biggest misconceptions out there.  If you have a home and only have a Will then your estate will go through Probate.  

 

A Will however is still a document you need.  When coupled with a Living Trust, a Will becomes what is known as a "Pour-Over Will."  

 

The most important thing a Will does is name a guardian for your minor children.  Without a Will, it will be up to your parents, siblings, and your in-laws to fight over custody of your minor children. 

 

What is an Executor?

 

An Executor is the person you name to be in charge of your Estate after you pass away.  They are nominated in your Will or Pour-Over Will.  Your Executor has many important duties including paying for your final expenses, debts, inventorying your assets, and distributing your Estate. 

 

What is a Trust?

 

A Trust is a legal document where you, as the Grantor of the Trust, make an agreement with your Trustee to manage your assets.  You decide how your assets are managed through your Trust document.  A Trust can accomplish several important things; first, it can manage your assets if you become ill. Second, it distributes your assets to whoever you wish and with whatever conditions you want.  Third, third, it avoids Probate Court.  A Trust is a highly customizable legal document.

 

What is a “Revocable” Trust?

 

A Revocable Trust is something you can change.  This means that after your Trust is finalized you can alter it or “amend” it.  This is done through a Trust Amendment or a Restatement of your Trust.  You can add to it, remove assets, change the terms, change the beneficiaries, revoke it and even start a whole new Trust. 

 

What is a Trustee?

 

A Trustee is the person who is in charge of your Trust.  They are the manager of the Trust.  You are your own Trustee while you are living and healthy.  If you become sick, unable to manage your financial affairs, or pass away, you will have designated a Successor Trustee who will be the next manager of the Trust. Your Trustee must follow the terms of your Trust and your wishes.  This is called a fiduciary duty.

 

What is a Pour-Over Will?

 

A Pour-Over Will is a legal document that accompanies with a Trust.  If you have an asset that is not funded in your Trust when you pass away, your Pour-Over Will takes that asset and moves, or "pours-over," that asset into your Trust so that the terms of the Trust can control that asset. 

 

What is a Power of Attorney?

 

A Power of Attorney is a legal document where you give another person the ability to make financial and legal decisions for you if you become incapacitated.  A Durable Power of Attorney means the document will stay in effect even while you are incapacitated.  The person who you name in this document is called an Attorney-in-Fact.  The power you give your Attorney-in-Fact ends upon your death.  A Durable Power of Attorney for financial management is not a substitute for a Will, Trust or other estate planning techniques. 

 

What is an Advanced Healthcare Directive?

 

An Advanced Healthcare Directive is a document where you set forth your wishes for your healthcare choices and end of life decisions.  These wishes can include items such as staying on life support or not, where you would like to reside, and who will make medical decision for you.  An Advanced Healthcare Directive can also allow you to waive your HIPPA privacy rights.  This means you can name people who will have the legal authority to talk to doctors, Medicare, and your long-term care insurance company.  An Advanced Healthcare Directive is also commonly referred to as a Living Will.

 

What is a Healthcare Power of Attorney?

 

A Healthcare Power of Attorney is a document where you can name someone to make your medical decisions for you if you are unable to make them for yourself.  Often times a Healthcare Power of Attorney is incorporated into an Advanced Healthcare Directive.