Frequently Asked Questions about Estate Planning in California 

Los Angeles, Calabasas, Westlake Village and San Fernando Valley, CA Estate Planning Attorney


What is estate planning?

It may surprise you to know that estate planning has very little to do with money or legal documents. Estate planning is really about creating your legacy: protecting and providing for you, your loved ones, and your property; staying in control; and offering guidance.

 

Who needs estate planning?

Actually, everyone needs estate planning. Children under the age of 18 are protected by their parents’ estate plan and everyone age 18 or older needs his or her own estate plan. Of course, estate plans vary immensely depending on goals, finances, family situation, domicile (where you live). There is no one-size-fits all estate plan.

 

When do my children need to get their own estate plan.

Everyone is surprised when we answer this question. Even an 18-year-old high school senior needs her own estate plan. Once a child attains the age of 18, she is legally an adult and must make her own health care, financial, and legal decisions. Without legal documentation, parents are powerless to act on behalf of their adult children.

 

Of course an 18-year-old’s estate plan is very different than a 48-year-old’s estate plan because life, assets, goals, and family situation evolve over 30 years, but some basics are the same.

 

Why do I need estate planning documents?

Your estate planning documents may seem complicated, but they’re simply instructions so those you select to help (trusted helpers) know what to do when. Many of our clients think of their estate planning documents as an instruction book. That’s all they are.

 

This is how it works: You chat with us about your goals, fears, dreams, finances, and family and we help you craft an estate plan (i.e. instruction book) that includes the legal language required to carry out your plan. Even though some legal terms, descriptions, and language is required, please know that we make a sincere effort to write each estate plan in plain English readable for your loved ones and trusted helpers.

 

Who’s a trusted helper?

A trusted helper is someone who helps you carry out your estate plan. Here are a few examples: health care agent who makes health care decisions for you if you are unable to make those decisions yourself; agent under a power of attorney who pays your bills when you can’t or don’t want to; guardian who cares for your children if you can’t; and a trustee who manages assets,

 

All trusted helpers must follow your estate plan instructions as well as the law. Don’t worry; we guide your trusted helpers and help them carry out their duties.

What is a trust?

Technically, a trust is a contract containing your instructions so others know what you want to happen and how they can help you. Trusts have been used for hundreds of years. Revocable living trusts have been popular for the last 40 years and are commonly part of a foundational estate plan. The revocable trust is easy; you serve as your own trustee and beneficiary during your lifetime. Other trusted helpers (i.e. trustees) are appointed to jump in and help if you aren’t able to manage your finances and day-to-day business and after your death.

 

There are many other kinds of trusts as well. Trusts are used to protect qualified retirement plans, life insurance, and other assets. They are also used to reduce taxes and carry out charitable, family, education, and business goals. We’ll help you determine whether a trust is a good fit for your individual situation and, if so, which trust is most appropriate.

 

What is a will?

Wills have a long history – not as long as trust history – but long enough. You absolutely need a will to:

  • Appoint an executor or personal representative
  • Appoint guardians for any minor children
  • Distribute assets in your individual name

If you don’t have a will, the court will decide who has settles your estate and raises your children and state law determines who gets your assets – and it may not be who you think. Most people want to make those decisions themselves.

 

What is a healthcare power of attorney?

As long as you are able to make your own healthcare decisions, you will continue to do so. But if tragedy strikes and you are unable to make those decisions, the trusted helper (i.e. healthcare agent) appointed in your healthcare power of attorney will make those decisions on your behalf.

 

What is a power of attorney?

It’s common to execute powers of attorney for healthcare, finances, real estate, and business purposes. Each has a separate, limited purpose. The gist is that a trusted helper (i.e. agent) is legally empowered to help you should you need or want help.

  • A healthcare power of attorney empowers your agent to make healthcare decisions on your behalf if you are not able to make those decisions yourself.
  • A financial power of attorney appoints your agent to make financial decisions and manage bills.
  • A real estate power of attorney authorizes your agent to manage, buy, or sell real estate such as if your spouse will attend a real estate closing, but you will not.
  • A business power of attorney grants your agent the power to make decisions related to your business such as if you are disabled or on vacation.

 What’s the difference between a living will and a will?

These two documents, the living will and will, sound similar but they are very different in purpose.

  • The living will states that you don’t want medical heroics to be kept alive if you are in an irreversible coma or vegetative state, but that you want to be kept as comfortable as possible. The living will is effective during your lifetime and is considered an advanced medical directive because you’re making a medical decision in advance. Your health care agent, named in your health care power of attorney, must respect your advanced medical directives.
  • The will does three things and is only effective after your death. Your will:
    • Appoints an executor or personal representative
    • Appoints guardians for any minor children
    • Distributes assets in your individual name

How do I name guardians for my children?

Guardians are always named in a will. If you fail to appoint guardians in your will, the court will decide who raises your children. For parents of minor children, this is the most important estate planning decision you’ll ever make.

Even though it’s hard and no one can raise your children as well as you can, move forward and select the guardians you think will muddle through the best. Some folks delay estate planning because they can’t make this decision. Don’t do that; it puts your children at risk.

When is my will effective?

Your will is only effective at your death.

When is my power of attorney effective?

Well, that depends. Most powers of attorney are effective immediately, but others are springing. A “springing” power of attorney springs into action upon the occurrence of an event such as disability or event.

What is a trust protector?

A trust protector is a trusted helper who ensures that your estate planning goals are carried out if the law or circumstances change, frustrating your original intent. A trust protector is empowered to update your trust without court interference to carry out your wishes.

What is an agent?

An agent is a trusted helper such as the healthcare agent under a healthcare or medical power of attorney as well as an agent under a general power of attorney.

How much money do I need before an estate plan is necessary?

You don’t need to be a Rockefeller or Kennedy to need an estate plan. In fact, you don’t need any assets to need an estate plan. What you do need is the desire to control your life or finances, someone you love, the desire to maintain privacy, or the wish to avoid court interference.

For example, an estate plan empowers your trusted helpers to make healthcare decisions and manage your day-to-day business if you’re not able to. An estate plan also appoints guardians for minor children and pets. And, avoiding medical heroics through a living will is also part of an estate plan.

 

Do I need life insurance?

You would have to come into the office for a chat for us to answer this question specifically. However, here are the general guidelines: If you have someone who depends on your income for support, you need life insurance. Children, spouses, partners, pets, and parents are the most common examples of dependents.

You may also need life insurance to fund a business buyout, equalize inheritances, or pay administration fees and taxes.

Do I need disability insurance?

If you’re working and depend on that earned income to pay your bills and support those you love, you likely need disability insurance. Disability insurance provides an income stream if you are unable to work due to illness or injury. WARNING: disability insurance policies and their definition of “disability” can be tricky. We can help you determine whether this kind of protection is appropriate for your individual situation and, if so, we’ll connect you with a reputable insurance agent.

What’s a disability panel?

A disability panel is two or more people who you select to determine whether you are disabled or not. If you are disabled, then all of the protections you’ve set up click into place and trusted helpers such as your disability trustees are empowered to step in and help.

What if the guardians I name can’t serve?

Such an important question that many folks forget to ask. It’s essential that you name contingent guardians in your will in case your primary guardians are unable or unwilling to serve if the time comes. Life does indeed change, so also be sure to indicate who gets the kids if guardians divorce.

What happens if I don’t have an estate plan?

If you don’t have an estate plan, the government has a plan for you – and you probably won’t like it. For example, it’s the court who will decide who raises your children and who handles your finances and private matters. And, it’s state law that will decide who inherits from you – it may not be who you think.

Will the state seize my assets if I don’t have a will?

No. It’s a common fear, but no. If you die without a will, state law will determine who inherits. It’s only if you have no will and no living relatives that your assets will go to the state. Your long lost cousin Sal will inherit before the state.

Who will take care of my finances if I become disabled?

Disability is the perfect example of needing trusted helpers. If you have an up-to-date power of attorney, the named agent will be able to manage your finances. Unfortunately, if you don’t have a power of attorney, your loved ones will battle it out in court and the judge will decide who’s in charge.

TIP: Be sure to name contingent agent in case your primary agent is unable or unwilling to serve.

 

How can I best protect my children?

So this is a question best answered in a personal conversation; however, we can provide general educational information:

Minor children need more protections than adult children but both benefit from your thoughtful estate planning. It’s essential that you name guardians (and contingent guardians) for minor children in your will; also, be sure to name guardians/trustees of the funds you leave for them. Minor children cannot inherit outright. Adult children don’t need guardians but most do benefit from lifetime trusts which can protect their inheritances from a divorcing spouse, lawsuit, bankruptcy, business failure, addiction, and spendthrift spending.

Should the same person I name as guardian for my children manage their trust?

Lawyers often say, “it depends,” because it does. Sometimes the same folks are appropriate for both roles and other times, naming different people is the right thing to do. This is what we call a “counseling issue,” meaning that after we talk it through, you’ll know what decision to make. The people who care for your children day-to-day may or may not be the best fit to manage the finances as well.

The federal estate tax won’t affect me; do I need an estate plan?

Often the fear of taxes or probate fees get clients in the door, but what they learn once they meet with us is that only a small part of estate planning is about the money or taxes. Estate planning is really about creating your legacy: protecting and providing for you, your loved ones, and your property, as well as staying in control; and offering guidance.

Do estate planning attorneys help reduce capital gains taxes?

Capital gains are an income tax – and, yes, income tax planning is a part of many, but not all, estate plans. When we learn more about your family, goals, and finances, we’ll let you know if you have an income tax planning opportunity.
 

What is probate?

Probate is the process by which the court validates a will and supervises the settlement of an estate, including the transfer of assets to beneficiaries.

How do I avoid probate?

Only assets in your individual name will go through probate. Many folks use a (fully funded) revocable living trust to avoid probate. In addition, contract assets such life insurance, retirement accounts, and annuities as well as assets owned by joint tenants with right of survivorship avoid probate as well.

 

Why should I avoid probate?

Most people want to avoid probate because it can include high fees and costs, significant time delays and stress, and everything that goes through probate is public information. Anyone can go on the Internet and see a listing of your assets, debts, beneficiaries, and who got what. If you’re like most people, you want to keep your family affairs and finances private.

What is living probate?

“Living probate” refers to the court process necessary if you don’t have a disability plan in place. It’s also referred to as “guardianship” or “conservatorship,” depending on state law. It can be a painful, arduous, and painful process for your loved ones that is easily avoided with powers of attorney and living trust planning. We’ve found that most folks also want to keep their family and financial affairs private with a disability plan instead of dredging through a public court proceeding.

 

What is Joint Tenancy with Right-of-Survivorship?

JTWROS is a form of joint ownership with a survivorship feature. Two or more people own as asset together and the survivor of them owns the property outright. For example, Joe and Sam own a house as joint tenants with a right-of-survivorship. Joe dies in a skiing accident. Now, Sam owns the house automatically by operation of law. There’s some “lawyer math” included in JTWROS. Each owner owns 100% of the property, no matter how many joint tenants there are, 2 or 20.

What does “Tenants-in-Common mean”?

Tenants-in-Common is a form of joint ownership in which the owners can own equal or unequal portions of the property. For example, Sally, Jane, and Sue own a beach house together as tenants in common. Sally is a 20% owner, Jane is a 30% owner, and Sue is a 50% owner in the beach house. There is no survivorship feature so when Sally dies in a boating accident, her 20% ownership in the beach house will pass to whomever she names in her will or trust, not necessarily Jane and Sue.

What is an LLC?

A limited liability company (LLC) is an entity commonly used to own and operate a business with relatively easy set-up, operation, and taxation. The LLC has two levels of asset protection: protection of LLC assets from outside creditors and protection of outside assets from LLC liabilities.