1. Why do I need an estate plan?
What many people do not realize--until it's too late--is the tax and probate laws in California make even the smallest estate complex and complicated, leaving it vulnerable to estate taxes and bureaucracy.
Estate planning sets down your wishes for yourself, your property and for the welfare of your family by enabling you to:
• Identify the beneficiaries of your estate.
• Define how your wealth will be distributed.
• Avoid unnecessary taxes, fees and the drawn out probate process.
• Set aside funds for your children and grandchildren’s education.
• Preserve your memories and values for future generations.
Ultimately, California estate planning enables you to make important decisions about your life and your future that will resolve legal questions while freeing your loved ones of painful decisions on your behalf.
2. What is probate?
Probate is the legal process used to manage a person’s estate after death. During the probate process, the person’s assets are collected; debts are paid and remaining assets are distributed according to the terms of the will or state law.
On average, California probate takes 12-18 months and depending on the size of the estate, probate fees can be astronomical.
For these reasons (high costs of probate and the length of time it takes to complete the process), many people set-up a living trust and use other trusts and techniques during estate planning to minimize probate or to avoid probate completely.
3. What is a trust?
Trusts are tools used in estate planning to manage and distribute a person’s property both during their lifetime and after their death.
Basically, the trustor (or property owner and usually the person creating the trust) transfers ownership of his or her property to a trustee, which may be himself or someone else. That person then manages the trust property and its assets according to the trustor’s wishes.
Most important, trusts can be implemented before or after death, making them a highly flexible estate planning tool. When coupled with a will, trusts can help minimize both the costs of and the time spent in probate or help avoid probate altogether.
4. What is a living trust?
Living trusts are those trusts that take effect during the life of the trustor. (Those that take effect after death are called “testamentary trusts.”) Living trusts are normally managed by the trust maker (trustor). Trust makers normally stay in control of their property during their lifetimes.
Trusts are highly flexible estate planning tools that enable the property owner (or trustor) to define the terms of the trust according his or her own wishes.
For example, a living trust may begin long before the trustor’s death and may continue after death. It usually defines the timeline for distribution of assets.
During estate planning, the trustor may also choose to make the trust a revocable trust (meaning he or she can revoke its terms at any time) or an irrevocable trust.
One of the key benefits of living trusts is their effect upon probate. If all property is transferred to the trustee (the person who creates the trust and is the person designated to manage the property before death), probate may be avoided entirely.
Another benefit of a living trust is that it allows for something called a “pour-over” will. The pour-over will states that any property the property owner did not transfer to the trustee before death should be transferred to the trustee after death.
The probate judge will order the untransferred property moved under the control of the trustee and the trustee will manage and distribute the additional property according to the terms of the revocable living trust.
5. What is a revocable trust versus an irrevocable trust?
A revocable trust can be changed or “revoked” at any time during the property owner’s life; however, the terms of an irrevocable trust cannot be altered.
Many people choose the revocable trust due to the added flexibility it gives the property owner to change its terms.
Yet, irrevocable trusts are invaluable in certain situations. For example, an irrevocable trust may be used to hold large gifts made to a minor child or to prevent the surviving spouse from altering the terms of a trust after the first spouse passes away. This is a key consideration during estate planning.
6. What is an “advanced healthcare directive”?
An advanced healthcare directive (also called a “medical directive” or “living will”) states your wishes regarding your medical care should you become terminally ill or incapacitated. An advanced healthcare directive sets down the medical treatments you desire and the steps you want taken on your behalf if you can no longer make these decisions yourself.
This document is also used in estate planning to identify who will make health care and life-prolonging decisions for you when you cannot make those decisions for yourself.
How much decision-making power that person has is up to you. Those powers and their limits should be clearly defined within the advanced healthcare directive document.
About the Dayton Law Firm
Headquartered in San Jose, California, the Dayton Law Firm provides expert legal care with empathy for individuals, families and businesses. The Dayton Law Firm’s practice areas include elder care, business succession planning and incorporation with a specialization in estate planning. The State Bar of California Board of Legal Specialization formally recognizes the Dayton Law Firm’s founder Rich Dayton as a Certified Estate Planning Specialist, an achievement very few California estate planning attorneys can claim. To secure your family’s future with peace-of-mind, contact the Dayton Law Firm today by email: info@thedaytonlawfirm.com or by phone at: 408 437-7570.
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