Frequently Asked Questions
about Estate Planning in California
What is Probate?
Probate is the court process that transfers assets from deceased people to their heirs and named beneficiaries (if they have a will). Probate proceedings can be expensive and are time consuming and open to the public. If a person dies without a Will (intestate), the State of California has statutes detailing how the decedent's assets are to be distributed to his or her heirs. Even if a person only has a Will (testate), probate is still required if there is no other asset transfer mechanism (like a trust) in place.
What is Joint Tenancy with Rights of Survivorship?
(in some states "Tenancy by the Entirety" when between spouses)
This is the most common form of asset ownership between spouses. Joint tenancy has the advantage of avoiding probate at the death of the first spouse because title to the assets pass automatically to the surviving joint tenant. There are many problems with joint tenancy though including 1. who is to manage the asset if both joint tenants are incapacitated, 2. Failure to properly account for gifts, 3. subjecting the asset to the debts, bankruptcies, and divorces or other joint tenants, and 4. loss of control in distribution at the death of one joint tenant.
What is a Will?
The document a person signs to provide for the orderly disposition of assets after death. Wills do not avoid probate. Wills have no legal authority until the willmaker dies and the original will is delivered to the Probate Court. Still, everyone with minor children needs a will. It is the only way to appoint the new "parent" of an orphaned child. Special testamentary trust provisions in a will can provide for the management and distribution of assets for your heirs. Additionally, assets can be arranged and coordinated with provisions of the testamentary trusts to avoid death taxes.
What is an Advance Care Directive?
An Advance Health Care Directive allows you to state your wishes in advance regarding your health care decisions if you are unable to and what types of medical life support measures you prefer to have or have withheld/withdrawn if you are in a terminal condition (without reasonable hope of recovery).The Advance Health Care Directive allows you to appoint someone of your choosing legal authority to make your health care decisions when you are unable to do so yourself. Everyone age 18 and over should have an Advance Health Care Directive.
What does Intestacy mean?
If you die without even a Will (intestate), the legislature of your state has already determined who will inherit your assets and when they will inherit them. You may not agree with their plan, but roughly 70 percent of Americans currently use it.
What are Beneficiary Designations?
You may avoid probate on the transfer of some assets at your death through the use of beneficiary designations. Laws regarding what assets may be transferred without probate (non-probate transfer laws) vary from state to state. Some common examples include life insurance death benefits and bank accounts.
What is a Durable Power of Attorney
and when do I need one?
These allow you to appoint someone you know and trust to make your personal health care and financial decisions even when you cannot. If you are incapacitated without these legal documents, then you and your family will be involved in a probate proceeding known as a guardianship and conservatorship. This is the court proceeding where a judge determines who should make these decisions for you under the ongoing supervision of the court.
What is a Revocable Living Trust?
This is an agreement with three parties: the Trust-makers, the Trustees (or Trust Managers), and the Trust Beneficiaries. For example, a husband and wife may name themselves all three parties to create their trust, manage all the assets transferred to the trust, and have full use and enjoyment of all the trust assets as beneficiaries. Further "back-up" managers can step in under the terms of the trust to manage the assets should the couple become incapacitated or die. Special provisions in the trust also control the management and distribution of assets to heirs in the event of the trustmaker's death. With proper planning, the couple also can avoid or eliminate death taxes on their estate. The Revocable Living Trust may allow them to accomplish all this outside of any court proceeding.
Who Should Have a Revocable Living Trust?
If you are California resident and own assets exceeding $150,000 in gross value and want to have those assets distributed according to your wises, not those of the State of California, you should consider a revocable living trust. A revocable living trust allows you to bring all of your assets together under one plan, provide for management of those assets when you are unable to and after your death, provide terms for the distribution of your assets to specific people and in what matter, and provides for tax savings and asset protection provisions that having no plan or just a will do not.