Making good decisions starts with understanding. The following are some questions that we hear often that you may find helpful.
Estate plans are not just for wealthy people. The truth is, everyone has an “estate.” An estate simply refers to your assets – including things like your home, car, retirement accounts, life insurance, bank accounts, investments, etc. It is important to develop a plan to designate how you would like these assets handled when you are gone, especially if you have small children.
If you have no estate plan in place, the state of California will make all decisions for you through the Probate Code. If your estate is exceeds $150,000, your estate will first go through probate.
During the probate process, the court will determine who is an “heir”, who is a person who can inherit your assets under the Probate Code. If you have minor children, they cannot directly inherit your assets. Instead, the court will assign a guardian of the minor child’s estate who will “hold” the funds for the minor child in a blocked account – meaning the guardian cannot use the funds without the court’s allowance – until the child turns 18 years old. Once the child turns 18, all the funds will be handed over directly to the child.
The court will also appoint a guardian of the person who will care for your child on a day-to-day basis, and handle for the child’s medical, educational and everyday decisions. If you don’t have a guardian nomination in place, a judge will determine who will be a fit guardian for your child and, often times, multiple family members will petition the court to get the guardianship of the child.
There are number of challenges with probate. First of all, it’s costly. And, since all the decisions are in the court’s hands, it can take a long time for things to be figured out – in California, typically a year or more. Your personal information is no longer private which means predators are able to see information about your family and young children. Plus, all decisions regarding your family and assets are left up to the court. A judge will make the decision on how to distribute your assets and when. A judge will also make decisions on the wellbeing of your children, including who will care for them and who will be in charge of their finances. With a properly drafted estate plan, the decisions are all in your hands and you can determine how much your child will get and when.
There are many benefits of a trust but the most important is that it helps you avoid probate, which can save your estate and your loved ones both time and money. A trust can also minimize or eliminate estate (death) taxes. And, it allows you to distribute your assets to your beneficiaries at varying times according to your wishes, instead of right away. Plus, it protects you from court involvement during incapacity (conservatorship).
Essentially, they all mean the same thing. They refer to a type of a trust that’s created during your lifetime and contains terms that can be changed until you death – at which time they become irrevocable. If such a trust is created by a married couple, some of its terms could become irrevocable upon the death of the first spouse.
One of the most important things a trust can do for your family is help avoid probate and assure your assets are distributed exactly the way you choose – whether that’s to your immediate family, extended family, friends, charity, etc. Additionally, it can specify how and when those funds are to be distributed. For example, if decided by a court, your assets will be given to your minor children when they turn age 18, regardless of your wishes or if your children are financially ready. With a trust, you can determine at what age your children can get their funds and even specify ways you would like them used – education, travel, purchase of a home, investment in a business, payment for wedding, etc.
Once a trust is created, you must ensure that your assets are either owned by you as trustee of your trust (real estate, investment funds, savings accounts, etc.) or name the trust as a primary or contingent beneficiary (life insurance, retirement funds, etc.). This means that you must transfer all your assets, like the title of your home, into the name of the trust or name the trust as the beneficiary of various assets, like your life insurance, retirement funds, etc.
The type of will often drafted in conjunction with a trust is called a “pour over will.” This type of a will ensures that if you forget to transfer your assets into the trust during your lifetime, they will be “poured over” into your trust at your death. That way, your trust can remain the controlling document by which all your assets will pass. However, before assets are “poured” into your trust, they will pass through probate. So, this type of planning should be last resource, and not a way to avoid “funding” the trust.
Minor children cannot control their assets, as they don’t have capacity under the law to handle their finances. In such cases, if an estate plan is not in place, a guardian of the estate will be appointed by the court to handle the child’s assets. The guardian of the estate will hold the funds for your child in a blocked account until the child turns 18 years old. Additionally, if the court does allow some funds to be used for the child’s upbringing, the guardian of the estate must file a biannual accounting to show the court how every single penny has been spent out of the child’s account. Once the child turns 18, the funds will be handed over to the child, even if the child is not mature enough to make good decisions on how to manage or use the inheritance. With a proper estate plan in place, you can place the money in a trust and name a trustee to manage the funds for your child in your absence and distribute your assets according to your wishes, and at a later stage in life.
When you have minor children, you’ll need two essential documents: a guardian nomination and a revocable living trust. The guardian nomination specifies how your kids will be taken care of and by whom. You can name both long term / permanent guardians in this document, as well as short term / temporary guardians. The revocable living trust specifies how your assets are managed and distributed to your children.
It really depends on how your trust was set up. Every law practice handles this situation differently. Since we work with many growing families, we make sure to include wording that will account for future children, whether naturally born or adopted. That way, even if you don’t amend your estate plan after having another child, the new child will be provided for and your assets will be split evenly between all your children.
Absolutely. But keep in mind that whenever you choose non-relatives to be guardians of your children, it is essential that you have your wishes specifically memorialized. If your wishes aren’t documented and the court has to make the decision, they will likely side with a relative, instead of your best friend. In your estate plan, it may help to specifically list why you chose your friend (over close relatives) as the guardian. You may also specify that a certain individual should never serve as your child’s guardian and why.
You should designate a temporary guardian for your child on a short-term basis. This document should specify the start and end date during the time you will leave your minor children with the designated adult. Your documented wishes will allow the short-term guardian to make medical, school-related and other important decisions for your child while you are out of town.
Technically, yes. But there are so many pitfalls to doing it on your own that it’s generally not worth it. Typically, websites and software programs that tout estate-planning capabilities offer only the most basic documents and no guidance. And when you are planning for your family’s future, it’s essential to get it right. Without a lawyer, there’s no one you can ask questions and no one asking questions of you to ensure you include all the important needed documents to protect your family in the way you intend. Typically, self-drafted documents are generic and targeted at the retiring population. They often don’t address the specific needs of a young family. Most importantly, when you work with an attorney and they make a mistake, you have courses you can take to rectify the situation. If you make a mistake while drafting your own documents, there is no recourse.
If you have minor children, speak with your significant other about who will care for your children if something was to happen to you both. It’s good to have a few people on that list in case the first person or couple is not able to take on these responsibilities.
Also, it’s important to determine who you would like to handle your financial assets after you pass. Whether you decide to make distributions outright or keep your assets in a trust, you will need a trustee or an executor to help collect your assets and either distribute them or keep them in trust according to your wishes.
Creating an estate plan takes approximately 4-6 weeks. However, if you have an upcoming trip or a medical procedure, we can work with you to speed up this process. We believe that it’s not the speed at which the documents are made that’s most important, but their accuracy and assuring they reflect each client’s specific needs. Because the documents are completely customized to your particular family, it takes time to get things done right.
No. But you must live in the state of California as our attorneys are only licensed to practice in California. We frequently use technology to represent clients virtually throughout California. Because we understand the challenges and schedules of young families, we take advantage of many technologies, including Skype, Facetime, etc. to offer virtual meetings when it’s more convenient for my clients. This allows us to still get to know our clients and build relationships despite our very busy schedules.
We also have a vast network of estate planning attorneys that work in other states. If you would like to connect with an attorney outside of California, give us a call. We will likely have a referral for you.
We understand that people are often concerned about fees when working with a lawyer, especially if those fees are hourly based. To start, we offer a free initial consultation, at which time we can access your particular situation and give you a quote based on your specific needs. We never begin working on an estate plan unless both parties have agreed to the fee in advance. While you can certainly find cheaper options, we encourage you to make sure you understand what you are getting. We provide a personalized experience for each of our clients and work hard to provide a great value for a reasonable fee.