Estate Planning

FREQUENTLY ASKED QUESTIONS

What is the Estate Planning?

Estate Planning includes:

  1. Wealth preservation;
  2. Incapacity planning; and
  3. Children/Beneficiary protection.

In short, it is a process of getting your affairs in order so that you walk away with the piece of mind that your legacy will be protected upon your passing. While many lawyers prepare documents that deal with the first two aspects—passing assets and incapacity planning, they fail to provide protection to your children/beneficiaries from future creditors and predators.

Who should plan?

Everyone, single or married, who has accumulated any assets and wishes to determine how those assets will be managed in the event of incapacity, or distributed at the time of death. No estate is too small for planning. It is especially important if you have minor or special needs children or grandchildren; if you wish to control how your assets will be managed or transferred; or if you want to save estate taxes and probate costs.

What if my estate is not very large?

You should still plan. Otherwise, your estate is guaranteed to go through the probate court and the State will determine who will receive your assets.

How do I know if I need Estate Tax Planning?

The federal tax laws allow each of us a tax credit to protect a portion of our estate against the inheritance tax. In 2013, any individual can protect the first $5.25 million of their estate, and, if properly planned, more advanced estate planning techniques can be utilized to reduce estate and gift tax liabilities.

How much does Estate Planning cost?

  • Planning discussions, and preparation of basic Estate Planning trust documents often take several weeks to complete.
  • Fees for this work generally ranges ranges from $2,500 and $6,500 depending on the complexity of your wishes. The cost can increase depending on the scope of work.
  • While this this cost may initially seem expensive, this investment will ultimately save you and your loved one's a great deal of money and strife upon your passing.
  • For instance, probating a California estate with a gross value (which does not take into consideration any mortgages owed on real properties) of $800,000 is $19,000 in probate fees alone, and can take up to 2 years to complete.
  • This leaves all of us with two choices: One: Save a few thousand dollars today, by either choosing not to plan or creating a will-based estate plan. Ultimately, this will ensure that your loved ones will be left with the expenses and headaches of probate. Two: Create a fully integrated Revocable Living Trust Family Protection Plan, which saves your loved one's from the future expenses and headaches of probate.
  • More importantly, such a plan empowers you with the calm and piece of mind that: 1) your wealth will be preserved by assets passing as you desire, 2) incapacity planning is completed, and 3) you can provide your children or other beneficiaries with lifetime protection—because your affairs are in order.
  • Besides the financial benefits that a welll-crafted estate plan creates, it is also one of the greatest gifts that can be given to your loved one's. Having your affairs neatly tied up for the person that one day must administer your estate gives he or she the space to grieve the loss of a family member and celebrate that person's life.

When should I plan?

Now! Estate planning is done in order to prepare for the event of an injury or illness resulting in incapacity or death. None of us likes to think about our own mortality, or even the possibility of becoming incapacitated.
That is why so many families are caught off guard and unprepared when incapacity or death strikes. You can only plan your estate before these events occur. After, it is too late. Estate planning is one of the most thoughtful and considerate gifts you can give to your family.

What is an estate?

Everything you own. This includes life insurance, business interests, personal property, real estate and retirement plans. The “value” of your estate is determined by what the “fair market value” of the assets is.

What is the Unlimited Marital Deduction?

Current tax law allows the tax free transfer of an estate from a deceased spouse to a surviving spouse. Estate taxes are not assessed or due until the second spouse dies.

What is Probate?

The public, court imposed legal process of protecting creditors, changing title and managing assets for people who have died or become incapable of managing for themselves.

Since deceased or incapacitated persons are legally incapable of owning or transferring property, the probate court protects creditors and arranges for transferring a decedent’s or ward's property.

In California, the probate process takes between 9 months and 2 years—if it is not contested, and probate costs and fees average between 3% to 5% of the total value of the estate. Owning property in another state will require multiple probates.

What is a Will?

A Legal document that advises the probate court about a decedent’s wishes for distribution of their assets. A will is only effective after the will creator's death, and a will must be probated.

What is a Trust?

The public, court imposed legal process of protecting creditors, changing title and managing assets for people who have died or become incapable of managing for themselves.

Since deceased or incapacitated persons are legally incapable of owning or transferring property, the probate court protects creditors and arranges for transferring a decedent’s or ward's property.

In California, the probate process takes between 9 months and 2 years—if it is not contested, and probate costs and fees average between 3% to 5% of the total value of the estate. Owning property in another state will require multiple probates.

What is a Durable Power of Attorney?

A Durable Power of Attorney authorizes someone to act on your behalf while you are alive, and if for some reason, you are not available, or capable of acting on your own behalf.

The person appointed to act for you is called your attorney-in-fact or agent.

There are basically two types of powers of attorney. A “Special” Power of Attorney authorizes the agent to act in a limited capacity, or to act on your behalf for only certain limited or specified purposes.

A “General” Power of Attorney authorizes the agent to do virtually anything you could do. A General Power of Attorney is a very powerful document. Either type can be made so that it is effective either immediately upon signing it, or effective at some later date, usually tied to a determination that you (the Principal) are legally incompetent.

What is an Advance Health Care Directive?

An Advance Health Care Directive (“AHCD”) is intended to be a written expression that you would prefer that no one go to extraordinary means to keep you alive if you were dying.

There is nothing mandatory about the AHCD, or that requires anyone to do or not do anything. The person(s) with your Power of Attorney, or the closest family member(s) will make the ultimate decision about life support measures.

It is very important that you discuss your preferences about this subject with your family now, when there is no crisis, rather than having them guess about what you would want. It is also good to have a clear understanding among all family members in order to avoid lasting conflict over different opinions at what is otherwise a difficult time.

What is a Community Property Agreement?

California is a Community Property state. That means that there is a legal presumption that whatever a husband and wife own, they own as their community property rather than either of them owning things as their separate property.

Married couples can confirm that they own everything as their community property by signing a written Community Property Agreement.

The advantage of the written Community Property Agreement is that it allows couples to avoid probate when the first spouse dies.

NOTE: however, using a Community Property Agreement to avoid probate is only appropriate if the married couple does not have a taxable estate. Otherwise, the result may be that substantially more estate tax than might have otherwise been due, is paid when the second spouse dies.

What are beneficiary designations?

Beneficiary Designations determine how certain assets will be distributed at the time of your death. These are most often used with life insurance policies, annuities, IRAs and other retirement plans.

You should be very careful with beneficiary designations because improper designations can result in assets being distributed to unintended persons, and can cause significant additional taxes to be due.

How do I choose whether to create a Will or Revocable Living Trust?

All properly planned estates should include either a Will or a Revocable Living Trust ("R:T") to describe who will benefit from the estate, and how the heirs are to receive their inheritance.

There is no tax advantage to either a Will or a Living Trust. Credit Shelter Trust tax planning can be built into both Wills and Living trusts.

The only significant difference between the two is that a Will requires probate, and a Living Trust that holds all of the decedent’s property avoids probate. A properly written Living Trust will also include instructions about managing your estate for your benefit if you become disabled.

While a Will should work fine in California, if one of your most important goals in estate planning is to make the process of transferring your estate to your heirs a private matter, and as easy and hassle free as possible, the Living Trust is generally the better choice.

What are the Statutory Probate fees in California?

Probate Code Section 10810 Sets the Statutory Executor/Attorney Fees for Probating a Calironia Estate. As of 2013, the current fees are:

  1. 4 % of the first $100,000 of the Gross Value of the estate;
  2. 3 % of the next $100,000;
  3. 2 % of the next $800,000;
  4. 1 % of the next $9,000,000;
  5. ½ % of the next $15,000,000; and
  6. For estates exceeding $25,000,000, an amount determined by the court.For example, an estate with a gross value of $800,000 would incur $19,000 in statutory fees alone.

The below chart illustrates the probate fee associated with estates of differing sizes:

What should I do to prepare to meet with my Estate Planning attorney?

When you are preparing for your initial meeting with your estate planning attorney, you should be prepared with the following:

  • A list of all real estate and all other assets, with an estimate of the current fair market value.
    Email us for a Confidential Estate Planning Client Information Worksheet
  • Copies of any existing estate planning documents, i.e. wills, community property agreements, durable powers of attorney, and any existing trust documents.
  • A list of all insurance policies showing face amounts, cash values, named insured, and the names of all beneficiaries and contingent beneficiaries.
  • Copies of any business documents such as partnership agreements or stock purchase agreements.
  • Account and Beneficiary Designation information on any retirement plans and insurance policies.

You might also want to think about the following:

  • What are your goals, aspirations, needs and desires in doing this planning? We will want to design the plan so that it specifically satisfies those purposes.
  • Who will you want as your personal representative in the case of a will, or as a backup or ontingent trustee in the case of trust planning? You can select anyone you choose, including corporate or bank trustees, with the exception that the person you select cannot have ever been convicted of certain crimes.
  • Who do wish to appoint as a guardian if you have minor children?
  • Do any of your children or grandchildren have special educational, medical or physical needs?
  • Are there any special planning needs or creditor protection issues to address for emotionally or financially unstable children or heirs, or for children from previous marriages?
  • Are there any Charities or others you wish to provide for, other than immediate family?

Need more info? CONTACT US for your specific questions.