1. Starting off with the basics, what is an estate plan?
Very simply an estate plan is a succession plan for your assets when you are gone and for the appointment of decision makers upon your incapacity. This can be as simple as designating beneficiaries on accounts, completing a healthcare directive with your doctor, or creating a hand written will.
2. What if someone does limited to no advance planning?
If someone does not appoint decision makers in advance a loved one may have to petition the probate court for the appointment of a conservator. This process is very expensive and makes public your finances and health situation.
If you make no plans for your assets or only have a will, your loved ones will have to petition the probate court to distribute your assets. The probate process is complex, time consuming, and expensive.
If you do not nominate guardians in a will your children may have to face a contested guardianship appointment.
3. How can someone avoid probate or a conservatorship?
Probate and a conservatorship proceeding can often be avoided by creating a comprehensive estate plan. A comprehensive estate plan consists of a trust, pour over will, power of attorney for finances, advance healthcare directive, HIPAA release, and Transfer documents.
4. How does a trust work?
A trust works like a contract to outline the individuals appointed to manage your assets upon your incapacity and death. This contract works by transferring assets into the trust or “funding it.” This means transferring title to bank accounts into your “Family Trust” or creating a new grant deed placing your property into the trust.
The benefit of a trust is that it largely avoids court interference. Everything is administered confidentially and independently.
5. What is the difference between a will and a trust?
A will is the traditional way of estate planning and covers all assets in your individual name when you pass. Your executor bring the will to the probate court and a judge must confirm the will’s existence and will then supervise its administration.
A trust is administered solely between the successor trustees and the named beneficiaries without the interference and costs of court. This can be done much quicker than the backlogged courts.
6. Are trusts just for the wealthy?
No. However, traditionally trusts were used as a vehicle for wealthy families to transfer wealth while the will was the traditional estate planning tool for the middle class. This has drastically changed in recent years in most states but especially in California. The costs and delays of probate court have risen drastically and the trust has replaced the will as the main estate planning vehicle for the middle class.
7. If someone has a mortgage on their property can they still transfer it into their trust?
Unlike a loan on an automobile, you are still the owner of your property if you have taken out a mortgage. Transferring your property into a trust will not trigger a due on sale clause. Instead, you will continue your regularly scheduled mortgage payments.
8. Does someone still need a trust if they have designated beneficiaries on all accounts?
Probably, beneficiary designations do not plan for the unexpected like beneficiaries predeceasing you, becoming incapacitated, acquiring a drug problem, or starting medicaid.
9. How often should I review my estate plan?
You should review your estate plan every three to five years or upon the occurrence of major life changes including marriage/ divorce, death, birth of grandchildren, purchase of new property, loans to children, or retirement.