Estate Planning – What are the Basic Documents in Your Estate Plan?

Written by: leonora  |  Published on: November 30th, 2011  |  Category: Estate Planning

So you’ve heard that in California it’s a good idea to have a Living Trust. What should your package contain when you get this “basic” Estate Plan.

Well, first what you are likely thinking of getting is a Revocable Living Trust. This trust is revocable in that it can be changed or thrown out entirely, while both people or one person that established the trust (Trustor(s)) are alive. It is likely that they appointed themselves the initial Trustees and as such have the power to change the Revocable Living Trust.

What is this Revocable Living Trust? Well, without the proper instructions within the Trust document, as well as the actual steps taken to transfer title of assets (like a house or bank account) into the Trust, this Trust might as well be an empty file folder with drawings of flowers (not that I have anything against flowers). By creating a Revocable Living Trust what you are doing is creating a set of instructions that will govern the way the property will be managed, who will manage it after you are gone. A properly drafted Revocable Living Trust, will allow for your property to pass to your surviving spouse, as well as your children and anyone else you want, in a way that you decide, rather than in a way the Court decides for you. It will help you to avoid Probate (a lengthy and sometimes costly Court process). When necessary and possible, it may help you minimize Estate Taxes that would otherwise be due. In short, it creates order and you will feel better once you have it.

There are various types of Revocable Living Trusts and you should discuss which type is best with your Estate Planning attorney. Because the law is ever changing, I believe that having a Trust that plans for the worst (change in the law that will lower the amount of exemption for estate tax purposes) is best for most people, because not only may your estate grow, but the law may change and since most people will sometimes forget to update their documents, it is better to have a Trust that will self adjust for these occurances.

Ok, so you now have a Revocable Living Trust and you have transferred the Title of your house, your investment property, your large bank account, and tangible personal property into the name of the Trust. What now? Are you done? No, not so fast. What about your car, your smaller bank accounts, other things you may acquire after you create the Trust. Well, that too can be taken care of. How ? By creation of a special Will, that at death will “pour-over” your assets into the Trust. Now, while it is important to transfer all the property into the Trust when it is created to avoid having to go through Probate, it is understandable that somethings will be left out. As such, the Pour-over Will, will take care of the issue. This will also likely be where you will outline your plan for your minor children as far as who will raise them and how the person raising the children will be able to access the money in your Estate.

Ok, now we are cooking. But not done. What more can you possibly need. Well, what about an Advance Health Care Directive which will spell out exactly what you want to happen in case you are critically ill and who you want to make decisions when you can’t. Unfortunately, many of us have seen people struggle to decide what to do when the doctor comes in to ask the tough questions when the parent or sibling is critically ill and will not recover. Wouldn’t it be nice to be able to ask that person. Unfortunately, absent having had talks about this before (in a sober state preferably), one may not be able to get the answer now. Wouldn’t it be nice to save your loved ones the agony of having to make such decision and the wondering whether the decision was what you would have wanted. Well with an Advance Health Care Directive you can tell them exactly what you want, so that when you are not able to, they don’t have to guess and wonder if they made the right decision.

Well, that was…educational. Surely, we must now be done. Almost. What about if a person is incapacitated and bills need to be paid, and a new property needs to be managed and the property hasn’t been included in the Trust yet. What now? Well, without a Durable Power of Attorney for Financial Purposes, you may need to get obtain a Guardianship of the Estate, which is again an uncomfortable process that could easily be avoided with a “simple” document. It is simple in what it allows to do, but should not be taken lightly, because it is powerful and the people you give this “power” to should be individuals you trust.

Are we done now? You can exhale, because we are in fact done. Done, with the basics, that is.

Please feel free to contact my to set up your free consultation to discuss your estate planning needs at 310.481.5098

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