Elder Law Services of Ventura County

Craig R. Ploss - Attorney at Law

Estate Planning

What is Estate Planning and why is it important?

Estate Planning is an important life planning process which helps you answer and document the following questions:

  • Avoids probate at death, including multiple probates if you own property in other states
  • Prevents court control of assets at incapacity
  • Brings all your assets together under one plan
  • Provides maximum privacy
  • Quicker distribution of assets to beneficiaries
  • Allows assets to remain in trust until you want beneficiaries to inherit
  • Can reduce or eliminate estate taxes
  • Is inexpensive, easy to set up and maintain
  • Enables your wishes to be changed or cancelled at any time
  • Makes your estate distribution wishes difficult to contest
  • Prevents court control of minors' inheritances
  • Protects dependents with special needs
  • Prevents unintentional disinheriting and other problems of joint ownership
  • Provides peace of mind

I have a will - isn’t that enough?

Contrary to what you've probably heard, a will may not be the best plan for you and your family - primarily because a will does not avoid probate when you die. A will must be validated by the probate court before it can be enforced. Also, because a will can only go into effect after you die, it provides no protection if you become physically or mentally incapacitated. So the court could easily take control of your assets before you die - a concern of millions of older Americans and their families.

 

What is Probate?

Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you don't have a valid will, your assets are distributed according to state law.

What's so bad about probate?

  • It is expensive. Legal/executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state.
  • It is time consuming. It usually takes 9 months to 2 years to probate an estate in California. During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval. If your family needs money to live on, they must request a living allowance, which may be denied.
  • Your family loses its privacy and control. Probate is a public process, so any "interested party" can see what you owned and who you owed. The process "invites" disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors. The probate process determines how much it will cost, how long it will take, and what information is made public

Doesn't joint ownership avoid probate?

It usually just postpones it. With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate. But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the heirs.

Watch out for other problems. When you add a co-owner, you lose control. Your chances of being named in a lawsuit and of losing the asset to a creditor are increased. There could be gift and/or income tax problems. And since a will does not control most jointly owned assets, you could disinherit your family.

Why would the Court get involved at Incapacity?

If you can't manage your finances or make medical decisions for yourself due to mental or physical incapacity (Alzheimer's, stroke, heart attack, etc.), only a court appointee can sign for you if you do not have a durable power of attorney (DPA) or an advance health care directive (AHCD) in place.

Once the court gets involved, it usually stays involved until you recover or die. The court, not your family, controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming and difficult to end if you recover. And it does not replace probate at death - your family could have to go through the court system twice!

What is a living trust?

A living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die. But, unlike a will, a living trust avoids probate at death, can control all of your assets, and prevents the court from controlling your assets at incapacity.

How does a living trust avoid probate and prevent court control of assets at incapacity?

When you set up a living trust, you transfer assets from your name to the name of your trust, which you control - such as from "Bob and Sue Smith, husband and wife" to "Bob and Sue Smith, trustees under trust dated (month/day/year)."

Legally you no longer own anything (don't panic: everything now belongs to your trust), so there is nothing for the courts to control when you die or become incapacitated. The concept is very simple, but this is what keeps you and your family out of the courts

Do I lose control of the assets in my trust?

Absolutely not. You keep full control. As trustee of your trust, you can do anything you could do before - buy/sell assets, change or even cancel your trust (that's why it's called a revocable living trust). You even file the same tax returns. Nothing changes but the names on the titles.

Is it hard to transfer assests in my Trust?

No, you simply need to change titles on real estate (in- and out-of-state) and other titled assets (stocks, CDs, bank accounts, other investments, insurance, etc.). Most living trusts also include jewelry, clothes, art, furniture, and other assets that do not have titles.

Also, beneficiary designations on some assets (like insurance) should be changed to your trust so the court can't control them if a beneficiary is incapacitated or no longer living when you die.

If something happens to me, who has control?

If you and your spouse are co-trustees, either can act or have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, your handpicked successor trustee will step in. If some other individual or a corporate trustee is already your trustee or co-trustee, they will continue to manage your trust for you.

What does a successor trustee do?

If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you automatically resume control. When you die, your successor trustee pays your debts and distributes your assets. All this is done quickly and privately, according to instructions in your trust, without court interference.

Who can be successor trustees?

Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should name more than one in case your first choice is unable to act.

Does my trust end when I die?

Unlike a will, a trust doesn't have to die with you. Assets can stay in your trust, managed by the person or corporate trustee you have chosen, until your beneficiaries (including minor children) reach the age(s) you want them to inherit. You may also want your trust to continue so it can provide for a loved one with special needs.

If I have a living trust, do I still need a will?

Yes, you need a "pour-over" will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will "catches" the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your living trust plan.

Is a "living will" the same as a living trust?

No. A living trust is for financial affairs. A living will is for medical affairs— it lets others know how you feel about life support in terminal situations.

Are living trusts new?

No, they've been used successfully for hundreds of years.

Who should have a living trust?

Age, marital status and wealth don’t really matter. If you own titled assets and want your loved ones (spouse, children or parents) to avoid court interference at your death or incapacity, consider a living trust. You may also want to encourage other family members to have one so you won't have to deal with the courts at their incapacities or deaths.


  With No Will With A Will With a Living Trust
At Incapacity - Unable to handle your affairs Court Control: Court appointee oversees your care, must keep detailed records,reports to court, and usually must post bond (even if appointee is your spouse). Court approves all expenses,oversees financial affairs. Court control - Same as no will No Court Control: Your successor trustee manages your financial affairs to instructions in your trust for as long as necessary. (In some states, court intervention may be required for health care decisions)
At Death Probate: Court orders your debts paid and assets distributed according to state law. Probate: Same as no will, but assets distributed per your will (if valid and any contests are unsuccessful). No Probate: Debts paid and assets distributed by successor trustee according to instructions in your trust.
Court Costs, Legal & Executor Fees At Death: Often estimated at 3-8% of estate's value. At Incapacity: Impossible to estimate. Same as no will. Costs can increase if will is contested. At Death: Usually none, if no estate taxes. At Incapacity: None. (Attorney can be helpful for larger estates.)
Time At Death: Usually 9 months to 2 years before heirs can inherit. At Incapacity: Court involved until recovery or death. Same as no will At Death: Usually just a few weeks(larger estates may take longer for estate tax filing). At Incapacity: No delays.
Flexibility and Control None; Court processes, not your family, have control at incapacity and death. When you die, assets are distributed according to state law, Limited: Same as no will except, when you die, assets are distributed according to your will (if valid and any contests are unsuccessful). You can change your will at any time. Maximum: You can change/discontinue your trust at any time. Assets stay under control of your trust, even at incapacity and after your death. More difficult than a will to contest.
Privacy None: Court proceedings are public record. Family can be exposed to disgruntled heirs, unscrupulous solicitors. None: Same as no will. Maximum: Living trusts are not public record. Your family can take care of your financial affairs privately.
290 Maple Court, Suite 118, Ventura CA 93003
(805) 642-8407 - FAX (866) 379-2149