Estate Planning FAQs
Here are answers to your most frequently asked questions about living trusts and estate planning. If you have additional questions not answered below, please contact us.
Living Trusts
If you own your house, you need a living trust. If you are married and own your house together, you should create a family/marital trust. If you want to set up a trust fund for someone or give someone the right to live in your house after you die (but not own it outright), you need a living trust. And most importantly, if you want to protect your assets from going through probate, you need a living trust. Have an experienced estate planning attorney prepare your living trust.
The main benefit of a living trust is that assets that pass through your living trust avoid probate, thus allowing quick and easy transfer to your loved ones. If you are married and create a family/marital trust, there may be estate tax advantages for the surviving spouse. And a living trust is a document that protects your privacy (unlike a will which is filed with the court and is part of the public record anyone can see).
Yes, you should transfer your house to your living trust. By filing a trust transfer deed with the county where your house is located, you ensure your house will pass through your trust and not be subject to probate. This will save thousands of dollars that can go to your loved ones and not to lawyers or the court. But you want to be sure the transfer is handled correctly to avoid possible reassessment of your property taxes. And make sure to have an experienced estate planning attorney handle the transfer of your house into your trust in order to avoid title problems when the house is eventually sold and to avoid probate.
No, everyone who owns their house, land or even a manufactured home needs a living trust. There are many people who do not have a lot of money in the bank, but they own their house or manufactured home when they pass away. You do not have to be “wealthy” to benefit from a living trust. And your loved ones will thank you later when they do not have to go to probate.
If you already have a living trust or family/marital trust and you want to update it, the best way to do this is by a restatement. A restatement allows you to “republish” your trust and replace the original trust, thus updating the entire document, including your distribution plan and naming your trustee, but without creating a whole new trust. Also with a restatement, all assets currently titled in your trust stay exactly the way they are (no need to re-title existing trust assets, like your house). With an amendment, you only update one part of your trust but the original trust document stays in place. The biggest advantage to a restatement over an amendment is that when it comes time to administer your trust, your beneficiaries and heirs only see the most current restatement. With an amendment, your beneficiaries and heirs see the original trust document and all subsequent amendments, so if you treated them differently in the amendment, they will know it. A restatement protects your privacy and avoids the unpleasant disclosure to beneficiaries of changes in your distribution plan.
Wills
Yes, everyone needs a last will. Even if you do not need a living trust, you need a will to direct who will inherit your estate. Without a will or a living trust (but you may not need a trust), the State of California will determine who will inherit your estate – and that person may not be the person you want. Preparing a last will is simple and easy, but there are requirements under the CA Probate Code that you want to be sure are followed so your will is valid and enforceable upon your death. The best way to do that is to have an experienced estate planning attorney prepare your will.
No! A will definitely does not avoid probate. This is a common misunderstanding. If you only have a will and your assets are just in your name with no beneficiaries, your will is going to have to go through probate in order for your loved ones to inherit your estate. This will require a long, expensive and document intensive process that could have all been avoided – but likely not with just your will.
A pourover will is a will done with a living trust. Your living trust names your beneficiaries while your pourover will names your living trust as the beneficiary of your will. If you create a living trust but leave assets out of your trust, or you acquire assets later that you do not transfer to your trust, the pourover will “pours” or transfers any left-out assets back into the trust. The pourover will is basically a safety net to make sure any assets left-out or acquired later are redirected to your trust and distributed according to your trust.
Durable Powers of Attorney & Medical Directives
Yes, everyone should have a Durable Power of Attorney (DPOA) for legal, financial and property matters. If you become incapacitated and are unable to manage your finances, a DPOA will be invaluable to your loved ones. If you are incapacitated, without a DPOA your loved ones will have to go to court to be named your conservator. But if you already have a DPOA in place, you will avoid the need for a conservatorship (the same way a living trust avoids probate). Have an experienced estate planning attorney prepare your DPOA.
A “Springing Durable Power of Attorney (DPOA)” only takes effect upon a doctor’s declaration of your incapacity (which means you lack the cognitive ability to take care of your affairs). Until your DPOA agent has a written declaration from a doctor, your Springing DPOA does not take effect. An “Immediate DPOA” is exactly what you think it is – it takes effect immediately upon signing and does not require a doctor’s written declaration to take effect, which means your DPOA agent can act on your behalf immediately regardless of your incapacity.
In California, the document that names an agent to make your medical decisions is called an “Advance Health Care Directive (AHCD)”. In other states, this document is often referred to as a “Living Will” or “DPOA for Health Care”. If you live in California you should have AHCD, which is the document that allows you to name an agent for health care decisions and designate your health care and end-of-life decisions. If you do not have an AHCD and you are unable to make medical decisions for yourself, your loved ones will need to go to court and be appointed the conservator of your person.
If you become incapacitated you should already have your Durable Power of Attorney (DPOA) and Advance Health Care Directive (AHCD). You DPOA allows your agent to manage your legal, financial and property matters while your AHCD allows your agent to make medical decisions for you. If you do not have a DPOA and AHCD and you become incapacitated it will be too late to create these documents and it will be necessary for your loved ones to go to court to be named your conservator. Having a DPOA and AHCD already in place will avoid the need for a conservatorship.
Important Information
You can name a transfer-on-death (TOD) beneficiary on all or most of your financial accounts. TOD designation is done through your financial institution and does not require you to update your trust or will (you just fill out TOD forms with the financial institution). As long as the person you name survives you, the money in the financial account set up for TOD beneficiary designation will go to that person. This is a quick and easy way upon your death to transfer money in your financial accounts to a loved one. But be careful! – If the person you name as your TOD beneficiary predeceases you, then the financial account may be subject to probate.
No, do not add a child’s name to the deed for your house! This can result in several unwanted consequences. First, you give up partial ownership of your house. If you want to sell it or get a loan against it, you need your child’s permission. Second, if your child has creditors coming after her, or your child has a court judgement against him, your house will be subject to their debts and liabilities. Lastly, there may be negative tax consequences for adding your child’s name to the deed for your house (see a qualified CPA for more on tax consequences). A better option is to set up a living trust, transfer you house to your trust, and name your child as the beneficiary of the house in your trust.
Joint tenancy is a form of ownership of real property (house, land, etc.) by two people where upon the death of one joint tenant the surviving joint tenant inherits the entire property. It does not matter if there is a will or trust, as long as one joint tenant survives the other joint tenant, the property goes to the surviving joint tenant. Tenants-in-common is a form of ownership of real property by two people where upon the death of one owner that owner’s share of the property passes to his or her beneficiaries as named in their estate planning documents (or by intestate succession if no will or trust) and not to the other co-owner.
If you are a California resident and you die without a will or trust, you die “intestate” which means the laws of intestate succession will determine who inherits your estate. Under intestate succession, the State of California decides who will inherit your estate, which includes your money and property. If you want friends or charities to inherit your estate, you must prepare a will or trust because under intestate succession only immediate family will inherit your estate. This will also likely require your loved ones to go to probate to administer your estate through intestate succession. It is always better to have a will or a trust.
Many people will consider using online documents or going to an inexpensive document preparation service that does not have attorneys on staff. Back in the early days of estate planning, when most people were husband and wife with two children, cookie-cutter estate planning documents made sense. But that is not the world we live in today. Today’s modern families, non-traditional couples, and members of the LGBTQ community require more specialized estate planning. Online documents and document preparation services cannot provide legal advice and can only provide you with cookie-cutter documents. If you have any specific needs or complicated estate planning issues, it is always better to have an attorney prepare your estate planning documents. If you use online documents or go to an inexpensive document preparation service, you or your executor/trustee should be prepared to pay a lot more in the future to have an attorney fix the problems created by cookie-cutter documents than if you had an attorney prepare them in the first place.
