Frequently Asked Questions about Estate Planning in California
What is Probate?
Probate is the court and process that looks after people who cannot make their own personal, health care and financial decisions. These people fall into three general categories: Minor Children (under age 18 in most states); Incapacitated Adults; and People who have died without legal arrangements to avoid probate. Probate proceedings can be expensive and time-consuming. Additionally, the court proceeding and associated documents are all a matter of public record. Many people choose to avoid probate in order to save money, spare their heirs a legal hassle, and keep their personal affairs private.
What is Joint Tenancy with Rights of Survivorship?
(in some states “Tenancy by the Entirety” when between spouses)
This is the most common form of asset ownership between spouses. Joint tenancy (or TBE) has the advantage of avoiding probate at the death of the first spouse. However, the surviving spouse should not add the names of other relatives to their assets. Doing so may subject their assets to loss through the debts, bankruptcies, divorces and/or lawsuits of any additional joint tenants. Joint tenancy planning also may result in unnecessary death taxes on the estate of a married couple.
What is a Will?
The document a person signs to provide for the orderly disposition of assets after death. Wills do not avoid probate. Wills have no legal authority until the willmaker dies and the original will is delivered to the Probate Court. Still, everyone with minor children needs a will. It is the only way to appoint the new “parent” of an orphaned child. Special testamentary trust provisions in a will can provide for the management and distribution of assets for your heirs. Additionally, assets can be arranged and coordinated with provisions of the testamentary trusts to avoid death taxes.
What is an Advance Healthcare Directive?
Sometimes called a "living will" in other states, this important legal document allows you to appointed a trusted person to act as your "Agent" or Advocate in the event you are ill, and medical decisions must be made. You typically express in the document your preferences regarding a variety of issues, including life support, pain medication, burial/cremation, and other important issues. Upon admission to the hospital, the admissions department will request a copy of this document. Before your trusted "Agent" can make decisions or sign consent forms, a copy of the Advance Healthcare Directive will be required.
What does Intestacy mean?
If you die without even a Will (intestate), the California Probate Code (or the laws of your state) sets forth who will inherit your assets. This may not be what you want, so it is important to have your "affairs in order", and state clearly who your heirs will be.
What are Beneficiary Designations?
You may avoid probate on the transfer of some assets at your death through the use of beneficiary designations. Laws regarding what assets may be transferred without probate (non-probate transfer laws) vary from state to state. Some common examples include life insurance, IRA's, annuities, and bank accounts.
What is a Durable Power of Attorney and when do I need one?
This important legal document allows you to appoint someone you know and trust to make financial and "business-type" decisions when you cannot. The document must state specifically what powers you allow your Agent to have - such as paying your taxes, handling your bank accounts, paying your bills, and even engaging in asset-protection activities and public benefit planning if you require expensive skilled nursing facilities. If you are incapacitated without these legal documents, then you and your family will be involved in a probate proceeding known as a conservatorship (guardianship in many other states). This is an expensive court proceeding where a judge determines who should make these decisions for you under the ongoing supervision of the court - and the judge may not permit your Agent to do things you feel are important. If you have someone you trust to make important decisions if you are ill or lose capacity, it is much easier, faster, and less expensive to name that person as Agent in a well-drafted Durable Power of Attorney document. It is critical to have the attorney draft the document, review it with you, and sign/notarize the document BEFORE there is an illness, stroke, or incapacity. Once capacity is lost, the person may no longer legally sign documents.e
What is a Revocable Living Trust?
This is an agreement with three parties: the Trust-makers, the Trustees (or Trust Managers), and the Trust Beneficiaries. For example, a husband and wife may name themselves all three parties to create their trust, manage all the assets transferred to the trust, and have full use and enjoyment of all the trust assets as beneficiaries. Further “back-up” managers can step in under the terms of the trust to manage the assets should the couple become incapacitated or die. Special provisions in the trust also control the management and distribution of assets to heirs in the event of the trustmaker’s death. With proper planning, the couple also can avoid or eliminate death taxes on their estate. The Revocable Living Trust may allow them to accomplish all this outside of any court proceeding.
Who Should Have a Revocable Living Trust?
Whether you are young or old, rich or poor, married or single, if you owned titled assets such as a house and want your loved ones to avoid court interference at your death or incapacity, consider a revocable living trust. A trust allows you to bring all of your assets together under one plan.