Tag: estate planning

Estate Planning Checklist: What You Should Know

Estate planning meeting

Everyone should have an estate plan—we are have at least some possessions to pass on—yet most people will put off creating an estate plan as long as possible. It’s easy to understand why, but the fact is that while it’s never too early to make an estate plan, someday, it will be too late.  If you’re reading this, the issue is already on your mind. So here’s a must-have estate planning checklist to help you get started.

1. Make an Inventory of Your Assets

The first step in any estate plan is determining what makes up your estate. Once you sit down and start making a list, you may be surprised by how many assets you have: your home, furniture, vehicles, collectibles, insurance policy, etc. So don’t worry if you can’t create a comprehensive list on the first go; think of it as a working document you can add to as new things occur.

Take special care to identify property that other people might not know. For example, cryptocurrency can easily be lost when a USB drive is tossed into the trash. Include information on where these assets are located, passwords, etc.

2. Decide Where Your Property Should Go

Once you know what your estate consists of, think about who you’d like to receive that property after you’re gone. For some people, it is simple; they want their surviving spouse to be their sole beneficiary or have the estate liquidated and divided equally among their children. Others may wish for a specific property to go to certain people or to give money to a charity.

It would also be beneficial to start thinking about how you want to transfer the property or plan for specific scenarios at this stage. For example, if you have minor children, consider what will happen if you die before or after they reach adulthood. Or perhaps your spouse is not the biological parent of your children, and you want them to have continued use of your home during their lifetime and then pass it to your children.

 3. Consider What Happens If You’re Incapacitated

If you are incapacitated, someone will likely need to make decisions on your behalf. For example, if you are severely injured in a car accident, someone may have to make financial decisions for you or even decide whether to continue life support. Thinking about these scenarios in advance can relieve the burden on your loved ones and ensure your wishes are respected.

4. Draft the Documents

After having defined your estate and decided what to do with it, it’s time to create the necessary documents. A wide variety of legal instruments are available to accomplish virtually any estate planning goal. For some, this may consist only of a simple will and perhaps a medical directive. Others may require more complicated measures, such as setting up a trust. You may already have some assets, such as insurance policies or retirement plans with named beneficiaries; verify that those beneficiaries match your current wishes.

At this stage you should also consider who you would like to be appointed as executor of your estate. This person will have a lot of responsibility—e.g., selling your property to distribute the proceeds—so choose someone you trust who is up to the task. A judge will decide who to appoint if you don’t name an executor.

5. Review Your Plan Regularly

An estate plan created when you were 30 years old may not be sufficient when you are 50. Periodically revisit your estate plan to see if your inventory of assets is up to date or if you need to change your beneficiaries. This is especially important after significant life changes, such as divorce.

Before You Begin, Speak to an Attorney

Estate planning is about peace of mind. You want to know that your loved ones are taken care of and that your property goes where it should. However, doing it on your own presents risks because if the documents are not prepared correctly, they may be challenged in court. Also, you may miss out on simple ways to minimize your estate’s tax liability.

Talking to one of our experienced estate attorneys will simplify the entire process and ease your mind. We can help you evaluate your estate and create a comprehensive plan that covers your needs. Contact our office to set up an appointment.

What Do Estate Planning Attorneys Do and Do You Need One?

What Do Estate Planning Attorneys Do and Do You Need One?

Although estate planning affects virtually everyone during their life and after it, there’s a lot of misunderstanding about it. This misunderstanding extends to estate planning attorneys as well, to the point where many are unsure what it is they do and whether one is necessary.

What Is an Estate Planning Attorney?

Understanding what an estate planning attorney does requires understanding an estate plan. The term “estate” means all of your property.  That is, everything in your name that can be passed on to someone else after you die. An estate plan, as you might guess, is the plan for what will happen to that property when you die or become incapacitated to the point where you can’t make decisions for yourself. If someone dies without an estate plan, their property is distributed among surviving relatives (or to the state, if there are none) according to the laws of intestacy.

Because someone dead or incapacitated can’t speak for themselves, many laws and safeguards are in place to prevent abuse. Estate planning attorneys specialize in this area of law and the documentation required to enable their client’s wishes. They primarily draft wills, trusts, and power of attorney forms that clearly express what the person wanted and hopefully reduce conflict among the surviving parties. Estate planning attorneys also work to minimize the tax consequences of passing along one’s estate.

Do You Need an Estate Planning Attorney?

Not everyone needs an estate planning attorney, but many people could benefit significantly from consulting with one. There is no one-size-fits-all test to determine if you should talk to an estate planning attorney. However, there are several factors to consider that may be helpful.

Size and Complexity of the Estate

It should be no surprise that the greater the value of the estate, the greater the need for comprehensive estate planning. Larger estates generate more intense interest from survivors, potentially leading to conflict. Additionally, the tax consequences are often a bigger concern. Generally, the more complex estates and deceased person’s wishes require the expertise of an estate planning attorney.

Creating a Trust

Trusts are an excellent and versatile estate-planning tool that can help you care for your loved ones, establish your legacy, and even avoid estate taxes. However, they require careful planning and should be created with the help of an attorney.

Children

Parents, especially single parents, can gain peace of mind by recording how they want their children cared for in the event they pass away before the children become adults. This can involve establishing a trust and perhaps designating someone to be a caregiver.

Business Owners

If you are an owner or partner in a business, a succession plan sets out who will be in charge and receive your interest in the company.

Health Concerns

If you have a serious health condition (and even if you don’t), you should consider taking a moment to communicate what will happen if you pass away or if you become incapacitated. For example, if you are about to have major surgery, granting power of attorney and detailing your health directives can help your loved ones make decisions if there are complications.

Talk to an Experienced Estate Planning Attorney

Creating a clear estate plan ensures your wishes are met after you’re gone and reduces uncertainty for your loved ones. Our team has years of experience creating estate plans that range from the basic to the extremely complex. Schedule a consultation today to learn how we can help you with your estate plan.

Estate Plan Checklist: Is It Time For A Checkup?

Couple Working On Their Estate Plan Checklist

How is your estate plan looking these days? If you created it years ago and have not kept it up to date, it might not match up with your wishes anymore. Our lives hardly ever remain static for an extended period of time, so it’s only natural that an estate plan would slowly—or sometimes rapidly—fall out of sync with our current reality. Ask anyone to create a high-level estate plan checklist, and you might get a few different versions, but they generally look something like this:

  1. Take stock of your assets
  2. Define your goals
  3. Meet with an attorney to create the right plan
  4. Revisit the plan from time to time to make sure it’s up to date

It’s very easy to lose track of this fourth component because it’s natural to think, “That’s done, now I don’t have to worry about it anymore.” However, sometimes an out-of-date estate plan can be just as bad as having no plan at all.

Why You May Need to Change Your Estate Plan

As circumstances in your life change, it is likely that your approach to estate planning and the legacy you want to leave behind will change as well. Here are some of the most common reasons that may cause someone to need to update their estate plan.

Marriage & Divorce

When people marry, they, of course, want to provide for each other, but they usually also want their new spouse to be involved in the planning process. There are probably new family members to consider, and marriage often brings new assets into the equation. On the opposite side, divorce involves a complicated disentangling of previous estate plans.

Increase in Assets

Our assets profoundly affect our estate plans. As we work, save, and invest, it’s common for our assets to increase as we get older. This may create considerations that did not exist before. For example, a person who once rented an apartment may later have rental properties of their own; that rental income could go into a trust for a family member or charitable organization.

Death or Birth of Family Members

Since most estate plans deal mainly with leaving assets to family members, it is expected that the plan should change as the family changes. In addition, as people pass away or children are born, you may need to make some major updates.

Changes in Attitudes and Opinions

This can cover a wide variety of situations. For example, you may have previously planned to leave a greater share of assets to a particular child because you thought they needed it, but now that’s no longer the case. Or, if you have created a health care directive—which we highly recommend—your thoughts on the subject may have evolved over the years.

Making the Necessary Changes

However your life changes, it is critical that your estate plan changes with you. First, review your current plan and make sure it matches your wishes. If not, that doesn’t necessarily mean you have to start over from scratch, but you should essentially repeat the original process: 1) Take stock of your assets; 2) Define your goals, and 3) Meet with an attorney to help you put the new plan into action.

Our team of experts is ready to meet with you to ensure you have the estate plan you want. Contact us today to schedule a consultation and we’ll help you review your estate plan checklist.

Estate Planning 101: The Different Types Of Trusts

Estate Planning 101: Trusts

Creating a trust or multiple trusts is an indispensable part of the estate planning process for many people. Trusts offer many advantages. They can reduce taxes, simplify the probate process, and give the grantor (the person who creates the trust) some amount of control over how their assets are used and managed even after they pass away. There are many different types of trusts in California. There is no one-size-fits-all approach because each has its advantages and disadvantages. Understanding some of the most common trusts will give you a sense of the tools available to you.

Testamentary Trust

The grantor’s will creates a testamentary trust after their death. A person might want this type of trust if they don’t wish to fully transfer their property to an heir (in the case of minor children, for example).

Because it doesn’t come into existence until the grantor’s death, the grantor may annul or make changes to the terms of a testamentary trust while they are still alive. However, the assets of the trust must go through the probate process.

Living Trust

As the name implies, a living trust is created while the grantor is still alive. The tax implications of a living trust and the degree of control the grantor may keep over the assets depend on whether it is a revocable or irrevocable trust.

With a revocable trust, the grantor may move assets in and out or annul the trust. However, any income is taxable to the grantor.

An irrevocable trust cannot be changed once created, so the trust itself must pay the taxes.

Special Needs Trust

A special needs trust provides for the needs of a person who is chronically disabled. The major advantage of a special needs trust is that the disabled person may still receive government benefits such as SSI or Medi-Cal. That’s even when the value of the assets in the trust would otherwise disqualify them.

A special needs trust can either be first-party (funded by the assets of the disabled person) or third party (funded by someone else).

Life Insurance Trust

With a life insurance trust, the trust owns and pays for an insurance policy on the grantor’s life. When the grantor dies, the proceeds of the policy are paid to the trust and distributed accordingly. Because the assets are not part of the estate, this arrangement can reduce or avoid estate taxes.

Charitable Trust

There are two main types of charitable trust: the charitable remainder trust and the charitable leads trust.

With a charitable remainder trust, the grantor may receive income from the trust assets for a certain period of time or the rest of their life. The assets are distributed to designated charities after the set period.

A charitable lead trust works oppositely. Income is paid to charity for the duration of the trust, and afterward, the assets may be distributed to family or others. The two types offer different income and estate tax benefits.

For Expert Advice on Different Types of Trusts

The list of California trust types could go on: bypass trusts, spendthrift trusts, blind trusts, etc. You have many options available to meet your unique needs, but it’s crucial to speak with an experienced estate planning attorney to find the best fit. Contact our office today to schedule a consultation.

Is DIY Estate Planning A Good Idea?

The Risks of DIY Estate Planning

Many people don’t have an estate plan in place. They may be young or believe they don’t have enough assets. Others recognize the need for one but try to do it all on their own. While we understand the impulse to avoid hiring an attorney, the benefits generally far outweigh the drawbacks and risks of DIY estate planning.

Risk #1: Invalid Documents

Whether it’s a will or trust or both, you must follow many rules and requirements for them to be considered valid.

If the documents you drafted aren’t clear enough, can’t be authenticated, or try to distribute assets in a way the law does not allow, they may be declared invalid by the probate court. In that case, the court will likely distribute your property according to the laws of intestacy (the state’s default rules of inheritance).

It’ll create two significant problems. First, your estate may not go to those to whom you wanted it to go. Some people may be overlooked, while others may receive more than you wanted. Second, it can make life difficult for those you’ve left behind. When someone contests a will in probate court, the process can be long, expensive, and emotionally exhausting.

A clear and professionally prepared estate plan, on the other hand, is much more likely to be executed smoothly and according to your wishes.

Risk #2: Higher Taxes

One of the most important considerations for an estate plan is the impact it’ll have on taxes. And that’s whether it’s your taxes, the taxes on your estate, or the taxes your heirs must pay.

There are various ways to reduce the overall tax burden and control when you must pay the tax. It can be complicated, and we advise you to leave it to the professionals.

Risk #3: Missed Opportunities

With a DIY estate plan, one big drawback is that you don’t know what you don’t know. Many tools will help you accomplish specific goals and prepare for a wide variety of contingencies. But unless you’re familiar with the ins and outs of estate law, you’re likely to take a few missteps.

Rather than trying to figure everything out on your own, a consultation with an attorney is crucial to make sure nothing gets missed.

Southern California Estate-Planning Experts

You’ll spend your whole life building up your estate. Determining what happens to it after you’re gone is one of the most important decisions you will make.

Trying to go it alone is likely to be frustrating and time-consuming. But more importantly, it may have unintended consequences for those you leave behind.

A quick consultation with our expert attorneys can help you create an estate plan that works and is right for you. Contact our office today.

Do You Need Both a Will and Trust?

Wills and Trusts

When it comes to estate planning, every case is as diverse and unique as the people involved. Luckily, modern estate planning offers a wide array of tools to accommodate virtually anybody’s goals. What is right for you will largely depend on the nature of your estate and those who you want to benefit from it.

Many clients come to us feeling torn between setting up a trust or relying solely on a will, but there is no need to choose between one or the other; a single estate planning can, and often does, include both a will and a trust (or multiple trusts).

Creating a Will

As most people know, a will is a written document that communicates how a person wants their property distributed after they pass away. It can be as simple or complex as the testator (the person who makes the will) wants it to be.

If a person dies without a will—“intestate” is the legal term for this—the state laws of intestacy provide a generic hierarchy for transferring their property. For example, if the person had a spouse, all the property goes to him or her; if not, it will be distributed equally among their children; if there are no children, then to the decedent’s parents, etc.

Of course, many people want a more custom-tailored estate plan than is offered by the laws of intestacy. For example, they may wish to leave specific property to specific people or leave property to a spouse for the rest of their life (called a life estate) before passing it on to their children. A will can accomplish all this and more when drafted by an experienced attorney. It can even be used to create a trust.

Different Types of Trusts

A trust is a legal arrangement whereby property is held on behalf of and for the benefit of another. Here’s an example: a person owns an apartment building; she dies, and by the terms of her will, if she dies before her child reaches the age of 21, the apartment building will be held in a trust until that time. The trust is its own legal entity, and all of the assets are managed by a trustee. The trustee has a legal obligation to maintain the building, pay taxes, etc. (paid for by the trust); depending on the terms of the trust, the monthly rental income may be paid out to the child, invested in a college fund, or whatever else the parent wished.

There are quite a few types of trusts, but they are separated into two main categories: revocable and irrevocable trusts. As the names imply, a revocable trust can be revoked by the trustor after its creation, while an irrevocable trust cannot. A trust established by a will is by definition an irrevocable trust, as the trustor is no longer around to revoke it. As to so-called “living trusts,” there are many reasons a person might create one or choose one type over another. For example, they may be looking to minimize their tax exposure or ensure that a child with diminished capabilities is cared for.

Identifying the right kind of trust and drafting a document that withstands legal scrutiny can be a complicated process. Therefore, you should consult an estate planning attorney.

Finding the Right Balance

With so many options available, estate planning involves choosing the right combination to suit your needs. The best way to do this is to sit down with an attorney who understands this area of law, identify your goals, and craft a plan accordingly. Take the first step today and contact our office to schedule a consultation.

Estate Planning: Irrevocable Trust vs. Wills

Irrevocable Trusts

There is no one-size-fits-all approach to estate planning. What works well for one person or family might be different for someone else, depending on factors such as the size of their estate, whether they have young children, etc. When deciding on an appropriate estate plan, one of the more common questions people have is about the difference between a will and an irrevocable trust.

Most people already know what a will is—i.e., a written document detailing how a person wants their assets distributed after they die—but they may not be as clear on how a trust works and even less clear about irrevocable trusts. Here is some brief information on what an irrevocable trust is and some of the main benefits and drawbacks of including one as part of your estate plan.

What Is an Irrevocable Trust?

A trust is an agreement to hold and administer property for the benefit of someone else. There are generally three parties involved: a grantor, the person who creates and funds the trust; the trustee, who is legally responsible for managing the trust and its assets; and the beneficiary, the person who receives the benefits of the trust. For example, if a grantor created a trust with an apartment building as its sole asset, a trustee would manage the building and send payments from the rental income (or whatever the terms of the trust dictate) to the beneficiary. A trust can be created by a will when the grantor passes away (known as a testamentary trust) or created while the grantor is still alive (a living trust).

When people talk about irrevocable trusts, they are referring to a type of living trust. It is irrevocable because once created, they take on a life of their own and cannot be changed or revoked without the consent of all the named beneficiaries. In addition, the grantor cannot take assets back from the trust. This is in contrast to a revocable trust, where the grantor retains some control. But it is the inflexibility of the irrevocable trust that gives it some advantages.

The Advantages of an Irrevocable Trust

Living trusts, in general, provide some great benefits for estate planning. Namely, the assets in a living trust avoid the probate process altogether after the grantor dies, and they are not subject to an estate tax. In addition, irrevocable trusts have a few additional benefits precisely because the grantor no longer has any control over the trust property.

First, the income from property in an irrevocable trust is no longer taxable income for the grantor. The grantor of a revocable trust, on the other hand, may be taxed on this income (though they are not taxed from income that goes to a beneficiary). Second, the assets of an irrevocable trust are safe from creditors. If the grantor declares bankruptcy or is required to pay damages from a lawsuit, the trust assets can’t be touched because the grantor no longer owns them.

What is the main disadvantage of an irrevocable trust? There is a clear tradeoff: control vs. the security of the assets. Once created, the grantor cannot change their mind. Anyone considering an irrevocable trust should carefully consider every consequence and obtain legal advice from an attorney.

Evaluate Your Estate-Planning Options

An irrevocable trust is a powerful tool to protect your assets and to provide for those you care about, but they require great care in their implementation. Legal advice from an experienced estate attorney is indispensable when creating the right plan for your specific needs. Contact us today to schedule an appointment.