There is no single estate plan form that works for everyone. If you consult with an estate planning attorney you can find out how to obtain your objectives, whether they are primarily to avoid taxes and legal fees, eliminate conflicts between your children or whatever your needs may be.
In California the main components of an estate plan are a trust, will, durable power of attorney and advance health care directive. Trust planning is particularly important if you have more than $150,000.00, own real property of any value, or have young children. If you do not know whether you need a trust as part of your estate plan, please give us a call.
Essential Components of Typical Estate Plans
Trust – This is your list of instructions on how to manage certain assets while you are alive and well, if you ever become incapacitated and after your death. With a trust in place a probate is usually not required.
Pour Over Will – This is your list of instructions on how to manage assets not covered by your trust instructions on your death. Typically the instruction is to distribute assets to your trust so that all assets fall under one set of instructions.
Powers of Attorney – This is your list of instructions on how to manage assets not covered by your trust instructions on your incapacity.
Advance Health Care Directives – This is your list of instructions regarding your health and medical care on your incapacity. There are instructions on prolonging or not prolonging your life, organ donation and pain medications that could shorten your life.
In addition to pour over wills, there are other types of wills. A simple will typically means a will for someone who does not have a trust. A holographic will is one a person writes themselves in their own handwriting. In California a will form is provided in the probate Code. It is called the California Statutory Will and it is useful in certain situations. It is free through the California State Bar.
Power of Attorney
There are many types of powers of attorney. Essentially they are used to give one person (the agent or attorney in fact) authority over some other person’s (the principal’s) legal matters to be utilized in the principal’s absence. A durable power of attorney is one that remains in effect following a person’s incapacity. A statutory power of attorney is a form power of attorney created by law. In California the Probate Code contains the California Uniform Statutory Form Power of Attorney. These are common in estate planning. A power of attorney for health care is now called an Advance Health Care Directive in California and if that is not confusing enough, used to sometimes be called living wills.
Estate Tax Issues
Typically the first step in avoiding estate taxes is to make sure that if it is needed, your estate tax exemption is applied to your estate. If you are unmarried, this happens on your death. If you are married, however, and like many couples leave everything to your spouse on your death without limitations, your exemption is not automatically applied. When your spouse dies, they will only get to use their own exemption. Thus, only one of two exemptions is applied. Depending on the size of your estate and the estate tax exemption at the time of your death this could reduce the estate passing to your beneficiaries dramatically. If you have a sizable estate you should talk to an estate planning attorney, unless you like paying taxes…
Special Needs Trusts
The term “Special Needs Trust” is used in several ways. Typically, it refers to a trust held for a disabled person or a person who cannot manage their own finances and includes provisions that do not impair that person’s ability to qualify for and receive government assistance. A common example is a trust set up by parents to care for a disabled child throughout the child’s lifetime. Special needs trusts can also be set up by a person receiving government aid who inherits property that will disqualify them for their benefits.
Pre and Post Marital Property Agreements
In California, property owned by married couples is characterized as community property or separate property by law. Many times, however, couples wish to re-characterize their property. This can be done for many reasons, including: to preserve or establish eligibility for government benefits, to protect assets for children of prior marriages, to fully utilize tax benefits or simplify division of assets in the event of a divorce. Pre marital agreements are done before marriage and post marital agreements are executed after marriage. Although there are many similarities between them, the law regarding pre and post marital agreements differs significantly. A discussion regarding the characterization of assets is often part of a married couples estate planning.