Frequently Asked Questions

What is an "estate" ?
The term "estate" when used in the estate planning context refers to everything that a person owns including real estate, vehicles, bank accounts, stocks and bonds, mutual funds, stock options, cash, furniture, jewelry, art, and other personal items. An estate also includes a person's business interests, life insurance and annuity contracts, pension benefits, IRAs, 401(k)s; any debts; and any claims against others, such as claims involving a personal injury. These assets may be in the person's name alone, but can also include interests in trusts, partnerships, and jointly owned property.

What is estate planning in California?
An estate plan will direct how your assets will be distributed after you die. You may just want a simple will, or you may be a candidate for a living trust. For a complete estate plan, you will also need to consider your health care decisions, tax implications, and the financial situation of your beneficiaries. You may also want to consider a durable power of attorney.

Why do I need to consider estate planning?
If you don’t have an estate plan, the State of California will direct distribution of your assets according to law, known as “intestate succession.” The typical intestate succession in California will give your assets first to your issue (children, grandchildren, great-grandchildren, etc.), then to your parents, or to your siblings if you have no children and your parents are deceased. If you want to control the distribution of your assets, you will need a will or a trust.

If the total value of all your assets is under $100,000, you might need only a simple will. You should also consider a power of attorney for financial matters and advance health care directive, both of which can make things easier for your family after your death.

On the other hand, if your estate is more than $100,000, you can avoid probate in California and reduce federal estate taxes if you have an estate plan that includes a living trust. A simple will does not avoid probate, and might not do much to reduce federal estate taxes.

What Is a Living Trust in California?
A living trust is a legal document that allows you to transfer ownership of your property from your individual name to your name as trustee of your trust so that all of your assets are “owned” by the trust. A revocable living trust is completely amendable, and as the creator and trustee of the trust, you have absolute, 100% control of the property in the trust during your life and capacity. Nothing changes except the name on the title to your property. The purpose of a trust is to avoid probate upon your death.

How often should I have my estate plan reviewed?
You should have an experienced California estate planning lawyer review your estate plan every five to seven years to determine if the distribution plan still fits your wishes, if the executors and trustees are still willing and able to serve, and to determine if your net worth requires advanced estate planning to shelter your estate from federal estate taxes.

What happens to my estate if I do not have a Will or a Trust?
Without a will or a living trust, your estate will be distributed according to the California laws of "intestacy" which automatically distributes your estate as follows: first, to any children you may have; or to your parents if you have no children; or to your siblings if you have no children or parents, and so on.  If this scheme does not fit your wishes, you should make a will or a trust.  You should know that oral directions for distribution are not be followed in court.

What are my responsibilities as a successor trustee?
The trustee is responsible for seeing that all of the decedent's affairs are wrapped up in a timely manner. Some of those duties may include: making the funeral or memorial service arrangements; paying the decedent's final bills and health care costs; making a preliminary list of the assets and their estimated values; meet with an attorney to review the trust, will, or other directions for distributing the estate; collecting all death benefits (social security, life insurance, retirement plans); pay the decedent's income taxes and/or federal estate taxes; make a final accounting of all the activities you performed for the beneficiaries, then divide the cash and other property and distribute it to the beneficiaries, unless the terms of the will or trust require the assets to be held in trust.  You may be able to do much of this yourself, but an attorney, corporate trustee and/or accountant can give you valuable guidance and assistance.

What does it mean to "fund" my trust?
Funding your trust is the process of transferring assets from your own name to the name of your trust. So, you will execute a new deed for your real property, change the title on your bank and brokerage accounts, and change the beneficiary designations on your life insurance policies. Generally, the assets that you want to put in your trust include all real property, bank accounts, securities investments, business interests and notes payable to you. You should discuss other beneficiary-designated assets with your attorney because there are special rules to consider.

Who should I name as the beneficiary of my IRA?

The basic options for appointing a beneficiary of our IRA include naming your spouse, children, a trust, a charity, or some other individual. The benefit of appointing your spouse or child is to allow those persons to "roll over" the IRA to their own tax-deferred account or IRA, further delaying income taxes until he or she must start taking the required minimum distributions. However, you should know that your spouse or child will have full control of this money after you die and is under no obligation to follow your wishes for naming a contingent beneficiary of the IRA when they pass away. Naming a trust as beneficiary will give you maximum control over who receives the money after you die. When you pass away, the required distributions can be paid to the trust over the life expectancy of the oldest beneficiary of the trust. However, you should talk to your attorney or financial advisor about the implications of naming a trust as a beneficiary of an IRA because many trusts pay income taxes at a higher rate than most individuals, but this only applies to income that stays in the trust.