What is Estate Planning?
Estate planning is the process of making a plan to manage your affairs in life and following death, and signing documents to implement that plan. It includes planning for health care and financial needs, and often includes tax planning.
Why do you need an estate plan?
If you don’t make a plan, the default plan California has adopted for you and your assets is going to apply, and you probably will not like it. If you lose capacity, a court will (eventually) appoint someone (a Conservator) to manage your person and your assets, but neither this court nor this Conservator will know your preferences for their management. The Conservator may make decisions about your health care that are not consistent with your values and wishes, simply because you have not provide a plan with those details. In addition, upon your death your assets will be managed and distributed through a public process known as “probate”, where every asset is listed and valued, then distributed to the persons the state has determined are your heirs, which could include estranged relatives or children you never met.
What are typical estate planning documents?
Most estate plans in California include a Trust, Will (to pour assets into the trust), financial power of attorney, Advance Health Care Directive, Nomination of Conservator, Authorization to Release Medical Information (aka, HIPAA Waiver), Certification of Trust, and transfer documents (bill of transfer, deeds and assignments).
What is a revocable trust?
A revocable trust is a document that provides instructions for managing and distributing assets. Revocable trusts can be amended and/or revoked by the person forming them (the “Trustor”). Revocable trusts are used in California to hold assets so that upon the Trustor’s incapacity or death they continue to be managed without the need for a conservatorship or a probate.
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What is an irrevocable trust?
An irrevocable trust is one that cannot be amended or revoked. Irrevocable trusts are used for making completed lifetime gifts. In addition, most trusts become irrevocable upon the death or disability of the Trustor who made the trust. Examples of irrevocable trusts are Marital Trusts, Credit Shelter (aka Bypass) Trusts, and Irrevocable Life Insurance Trusts.
Do you transfer assets to the trust as part of the planning process?
A trust with no assets cannot help you to avoid a probate or provide a process for asset management during your incapacity. Our planning always includes preparing documents to transfer your assets to the trust. That said, some assets, such as bank accounts and insurance, will have to be transferred by you. We will provide instructions and can assist you to complete forms as required.
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How often should an estate plan be reviewed?
Putting your plan in place is very important, but you should not thereafter put your binder on a shelf and forget about it. It is important to also let your agents know you have a plan, and what roles you would like them to take. We recommend giving copies of your health care directive and waiver of HIPAA to your next successor agent so that he or she is able to act quickly on your behalf if the need arises. Finally, you should review your plan periodically (every 3 -5 years is recommended) as well as upon any major life change (such as marriage, a birth, a death, or a health crisis).
What is Trust Administration?
Trust administration is the process by which someone (the Trustee) manages and distributing trust assets as instructed in a trust agreement. This is usually done after the trust becomes irrevocable because of the incompetence or death of the Trustor who set up the trust.
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