While we do not like to consider our own mortality, proper planning and communication can help a family develop a common understanding as we face aging and life transitions. It is important to let our family members know our wishes on death and who we want making medical and financial decisions when we are unable to do so. Having a solid estate plan in place can ease your worries by giving you peace of mind that your intentions will be respected, and provide a valuable gift to your family and loved ones.
Both wills and living trusts are designed to do the same thing ? to administer one’s estate and pass on assets at death; determining which is best for you depends on your individual circumstances. In most cases, the living trust will be the preferred vehicle for accomplishing this task.
A will is a legal document ? signed and witnessed ? that indicates how your property will be distributed. While a will is a perfectly valid method for transferring assets on death, in most cases, the will must be administered through a court proceeding known as probate. There are three primary objections to probate: time, expense and publicity. Probate is a public proceeding (all records are open to the public); it is time consuming (the simplest probate matter could take 12 months); and it can be a costly proposition (attorney’s fees and executor commissions are set by statute and when combined with other costs, the total charge against the estate could be five percent of the gross value). A different and commonly used type of will called a pour-over will is described below.
For most persons, a living trust is a better alternative. With a living trust, the three major objections to probate are eliminated because the administration of the trust is handled privately without the need to go to court. A living trust (revocable intervivos trust) is a written legal document, signed and notarized, in the form of a declaration of trust or trust agreement. The person who establishes the trust is called the settlor, the trustee, and the current beneficiary. Upon formation, the settlor’s assets are retitled to the trust. In the trust instrument the settlor names a successor trustee to take care of trust administration in the event of death or incapacity of the settlor, and, names one or more beneficiaries to receive assets from the trust on death.
Both wills and trusts are important aspects of an estate plan, which will help ensure that one’s intentions are carried out as planned. Without either, distribution of one’s assets on death is subject to the statutory scheme set out in the California Probate Code.
Making their way into the marketplace are Websites boasting quick and easy software that will create your will or trust after answering a simple questionnaire. In uncomplicated circumstances, creating a will or trust in this fashion may be better than having no estate plan at all; however, for the majority of us, these cookie cutter plans may not be appropriate. We may have other issues that are not easily addressed by “one size fits all”? wills or trusts. If you have a situation that might require legal judgment, such as multiple marriages, stepchildren, special needs children, tax issues, special assets, or properties located in different states (subject to different laws), it may be more beneficial to seek legal advice in creating your estate plan.
Foundation for a Solid Estate Plan:
1. Declaration of trust (or trust agreement) is the primary estate plan instrument to provide for support of the settlor during one’s lifetime, to manage trust assets in the event of incapacity; to provide for the orderly disposition of trust assets on death; to provide for management of trust assets for support of young and/or special needs children after one’s death.
2. Pour-over will is a will used to transfer assets inadvertently omitted from trust into the trust to ensure that these assets will be subject to the distribution plan in the trust (may be subject to probate requirements).
3. Durable Power of Attorney for finances is an instrument in which you give another person (agent or attorney-in-fact) legal authority to act on your behalf, often used in the case of incapacity.
4. Advance Health Care Directive lets your physician, family and friends know your health care preferences. By considering your options early, you can ensure the quality of life that is important to you and avoid having your family “guess”? at your wishes or having to make critical medical care decisions for you under stress or in emotional turmoil.
5. POLST or Physician Ordered Life Sustaining Treatment is a free standardized medical order form signed by the patient and physician that indicates the specific types of life-sustaining treatment a seriously ill patient does or does not want.
6. Trust Transfer Deeds re-title real property to the Trust. The trust instrument may dispose of property only if that property is properly titled in the name of the trust.
While it may seem overwhelming at the beginning, with the help of an attorney specializing in estate planning, the path to developing a solid plan for the future is achievable. A good estate plan will avoid probate and ensure your wishes are clear and your assets are preserved with strategies to minimize taxes. Whether a will or a living trust is right for you depends of your unique situation, but with planning, dialogue and communication, the entire family can develop a common understanding of your wishes and be better prepared to address changing needs. Having these conversations and getting these documents completed is a gift to your loved ones. Knowing your family is knowledgeable about what you want can help to give you peace of mind.
The above article is not intended to be legal advice to the reader, but merely general information about the subject matter. Estate planning and related tax issues are complex and require the attention of a professional for proper analysis of each individual’s special factual situation and implementation of a plan unique to the client’s needs. If the reader has questions concerning estate planning, s/he is urged to consult with an estate planning attorney of his or her choice. The views expressed in the preceding commentary are not necessarily those of the Nichi Bei Weekly.
Based in Oakland, Calif., Eugene Tomine has been practicing law as a solo practitioner with primary emphasis in estate planning, probate and trust administration since 1986. He is also of counsel to Teraoka & Partners LLP of San Francisco. He can be reached at (510) 318-6363 or email@example.com.