What is an Estate Plan?
Your estate is everything that you own. Your estate plan consists of the tools set in place to distribute or manage your property in the event of your incapacity or death, marriage, or divorce. These tools include a will, durable power of attorney for finance, advance health care directive, trusts, and marital property agreement.
What is Probate?
Probate is a court‑supervised procedure for validating a will (if there is one), paying debts, and distributing the property of a deceased person. The procedure can take about a year or longer. A total of about five percent (5%) of your estate is paid to your attorney and executor for their services.
What is a Will?
A Will is a document that designates (1) your beneficiaries, including alternative beneficiaries, and (2) a ʺpersonal representativeʺ to settle your estate and distribute your belongings.
Who is My Personal Representative?
If you have a will, your personal representative is called your executor. If you do not have a will, the court will appoint a representative, called an administrator.
In selecting your representative, pick someone who is a very good record keeper and who has the time to take over your affairs. Remember, this person will step into your shoes to pay your bills, do your banking, perhaps sell your home and securities, distribute your personal effects, and deal with your heirs at a very emotional time. You can have a personal representative who lives outside of California, but consider the complications of time and distance.
How are My Assets Distributed?
The Will spells out how you want your assets and personal belongings distributed. If you have a trust, the distribution will appear in the trust, instead of the will.
Durable Power of Attorney for Finances
A Durable Power of Attorney for Finances is a document by which you name a legal representative to manage your affairs if you become incapacitated. Be very careful who you select to give your durable power of attorney. You must have complete faith and trust in this person.
Advance Health Care Directives
An Advance Health Care Directive names someone to make health care decisions for you if you cannot make them for yourself. This used to be known as a "Living Will" or a Medical Power of Attorney".
It expresses your wishes regarding life support and health care. This is a separate document from your durable power of attorney for finances. You may wish to appoint one person to handle your financial affairs and another to make health decisions for you.
What is a Trust?
A trust is an arrangement involving three parties. You, the ʺTrustorʺ, transfer property to a ʺtrusteeʺ who will hold or manage the property for your ʺbeneficiaryʺ.
You can set up a revocable trust in which you remain in control of the funds and can even be the trustee. You hold title to your property in your name, as trustee. You can end (revoke) this kind of trust whenever you wish or amend the trust during your lifetime. Revocable Trusts are also called Living Trusts or Inter Vivos Trusts. These trusts can be set up to serve a variety of purposes.
Why is Title to My Property Important?
You may be surprised to find out that the title to your property controls its disposition. Title takes priority over your will or trust.
For example, if your assets are in joint tenancy with your son, they will pass to your son at your death. Even if your will directs the equal division of your estate between your son and daughter, the jointly held assets will pass only to your son because joint tenancy property passes to the surviving joint owner. Similarly, the same is true of life insurance, annuities, IRA, and pensions because these assets pass directly to the named beneficiary and not under the will.
Therefore, it is very important to coordinate how you hold title with your entire estate plan.