WHAT EXACTLY IS ESTATE PLANNING? (PART II – WILLS AND TRUSTS)

WILLS

A Will is a document that sets forth how you want your property distributed upon your death.  It can be extremely specific (e.g., “I hereby give, devise and bequeath my personal residence and all personal property to my son Jerome, with the exceptions that all of my fine china shall go to my niece Jenny, and my yellow couch to my best friend Fifi.

WHAT EXACTLY IS ESTATE PLANNING? (PART I)

What exactly is estate planning, and who needs it?  Estate planning is primarily the process of determining how, when, and to whom you want your property to pass upon your death.  It also addresses how you want your estate to be handled when and if you lose the ability to manage it yourself (often referred to as “disability planning,” a subset of estate planning).

Good estate planning will, among other things: provide management and protection of family assets; control the management of your property and your personal financial needs when you are unable to manage your estate yourself; eliminate uncertainty regarding inheritance; ensure the continued financial health of your loved ones after you are gone; provide creditor protection to your heirs; simplify administration of your estate; avoid the high cost and time of probate; minimize applicable estate and/or inheritance taxes; define and accomplish your charitable wishes; minimize income taxes payable by your estate (which necessarily reduce the property passed on to your heirs), and; provide post-mortem control over your assets.

SHOULD I NAME MY TRUST AS THE DESIGNATED BENEFICIARY OF MY RETIREMENT BENEFITS?

While most assets can be transferred into trust, certain assets are contractual in nature, and therefore cannot be “funded” into your trust.  The most relevant of these contractual assets are life insurance policies and retirement benefits.

While you cannot place these assets in trust*, you can name your revocable living trust (RLT) as the Designated Beneficiary.

Non-trust and Non-probate Transfers (part III)

DESIGNATED BENEFICIARIES

As with joint tenancies and community property with right of survivorship, property which passes to individual(s) as a result of a designated beneficiary provision (life insurance and retirement assets, generally) is outright, and therefore free of any management by the decedent, and is subject to the beneficiary’s creditors.

Probate Litigation

Probate litigation is sometimes necessary to protect the rights of beneficiaries or heirs, potentially due to an unclear or poorly drafted will or due to a dispute among family members. Probate law in California can be complicated and these matters may easily become hotly contested due to emotionally charged issues and legal complexities.

Trust Administration

As Trustee of a trust, you have a duty to administer the trust pursuant to both the trust provisions, and relevant law.

When a trustmaker passes away, several items are put in motion.  While administering a trust estate is significantly easier than administering a probate estate, there are still several steps that must be followed, and laws that must be adhered to.

Valid Wills and Revocation

What constitutes a valid will? Can great Aunt Sally create a valid will by writing “I leave all of my earthly possessions to my cockatiel Cornelius. – Sally” in lipstick, on her vanity mirror? Does it need to be witnessed or notarized? 

A testator (the person making the will) generally must be 18 years old to make a valid will in California, unless they’re an emancipated minor.