Is Estate Planning Just Beneficial After Death, Or Could It Benefit Me During My Lifetime?

Estate planning can deal with issues that arise both during your life and after your death. The estate planning matters that people are most familiar with tend to deal with what happens to your property and assets after you die. However, other fields of estate planning that are just as important deal matters like what should happen in the event that you are incapacitated during your lifetime.

What Is A Trust? What Are The Common Types Of Trusts That Are Used In California?

A trust is a vehicle that allows the makers of the trust—the trustors—to:

  • Itemize specific parts of their wealth, property, and assets;
  • Decide exactly how they want those property and assets to be distributed, and to whom (whether it be a surviving spouse, children or grandchildren, friends, charitable trusts, or other beneficiaries)
  • Set up and enable the legal distribution of those properties and assets in accordance with their wishes.

The most commonly utilized type of trust for individual estates is a revocable living trust. There are other trusts that are available for more advanced tax planning and asset protection services, including irrevocable trusts, and sub-trusts for children that deny them access to the principal and generally prevent them from spending all of the money in the trust. Those trusts can either be set up within an revocable trust, or separate from a revocable trust.

What Are Some Key Components That Should Be A Part Of Everyone’s Estate Plan In California?

A basic estate plan in my practice encompasses approximately 10 to 11 documents per person, though most estate plans wind up including more than that.

Among those documents, we obviously have the revocable living trust, as well as the will, or what I like to call the “pour-over will”. A pour-over will essentially functions as a safety valve, allowing us to add anything to the revocable living trust that was accidentally omitted.

The other documents include a durable power of attorney, which is the financial power of attorney that I have my clients sign. A financial power of attorney authorizes a designated, trusted person to take over a person’s financial and real estate matters if they are incapacitated and unable to handle such matters on their own. This could be in the event of an acute injury or illness (like a temporary coma), or in the event of a terminal state of incapacitation (like dementia or Alzheimer’s).

The other type of a power of attorney is called a medical power of attorney, often called a medical directive. A medical directive is basically a legally enforceable statement about handling medical choices, decisions, and issues that may arise. In the event that you are incapacitated (again, either acutely/temporarily or permanently), the medical directive allows a trusted person to serve as your proxy. Your designated healthcare proxy will have access to your medical information and will be able to make any decisions about your healthcare that are not delineated elsewhere.

The next document is what we call a living will. A living will basically states your wishes and preferences about things like life support in a way that is legally enforceable. In a living will, you can delineate—as specifically as you’d like—the circumstances under which you would want to be kept alive artificially, and the circumstances in which you would prefer to “pull the plug.”

For instance, some people specify that if their chances of surviving without being on a ventilator or some other form of life support is extremely low, or if they are not conscious and their chances of waking up are very low, that they should then have life support withdrawn and be switched to palliative care. Some people specify the opposite, asking that they be kept alive if there is any chance of survival or regaining consciousness, no matter what.

Generally, a living will allows a person to put their actual wishes about these matters in writing, so that if a decision has to be made on their behalf, the decision-makers know that they are following the person’s wishes.

Other documents may be included in specific sorts of estate plans, such as property memorandums and personal property memorandums. These are usually included in the estate plans of couples that have mixed families—that is, children from previous marriages as well as, in some cases, children from their marriage. We typically include property memorandums and personal property memorandums for couples that want to give specific assets to their children from prior marriages and specific assets to the children from their current marriage. These memorandums allow us to allocate specific properties in separate documents.

Estate plans should also address community property issues and separate property issues. Those typically come up in California when someone has a property or a specific portion of an inheritance that they want to maintain separately, rather than delivering it into the trust. Importantly, in California, once you deliver separate property into a community property setting, it changes the nature of that property into community property. So, while some people choose not to separately maintain property like that, those who do have to be very careful about the way that they do it.

The other thing we provide is funding instructions for trusts, or advice on how to fund a trust. Trusts are essentially containers—say, like buckets—in that they don’t work unless you put things into them. Funding a trust means putting assets and property into the trust so that it can actually be used as a vehicle to pass down those assets and that property.

All-in-all, by the time we get done the basic documents for each person, a typical couple’s estate plan will have around 19-21 separate documents. These documents will encompass the couple’s entire estate plan, which covers contingencies for issues during your lifetime (i.e., incapacitation) as well as issues of estate administration and dispersal after your death.

Ideally, if we are utilizing a trust, we will have fulfilled one of the main purposes of that trust, which is to avoid having to go through the Probate Court process. With a properly drafted trust, your friends and family members will not have to go into Court to administer your estate after you pass away. You can have a trustee and a trust administration attorney handle your estate instead, entirely bypassing the Court in most cases.

How Often Should Someone Review And Update Their Estate Plan In California?

This depends on the state of your current estate plan. If your current estate plan was drafted using an online service or through a self-help process, you will usually have to redo your estate planning documents, either in part or entirely. This is because estate planning documents put together through online/self-help services are typically extremely insufficient for use. Drafting estate planning documents is an incredibly specialized field, and the average layperson simply has no way to know whether they have correctly executed an estate planning document that will meet their individual needs and the needs of their heirs and their estate. In all likelihood, any estate planning documents put together by a layperson (even with the help of online services/self-help processes) will have several major omissions or misworded clauses that could catastrophically derail the execution of an estate.

When people create trusts through online or self-help processes, they tend to be written off of a “fill-in-the-blanks” style template. Typically, this does not bode well for the usability of those trusts. They are often either not properly funded or nor properly implemented, such that they have little or no value.

In short, people who have put together any estate planning documents—trusts or otherwise—through online or self-help services need to have those documents examined and amended by an estate planning attorney as soon as possible.

For people that have an older trust that was actually drafted by informed and adept legal counsel, I typically recommend that they review their trust every 3 to 5 years. There are two reasons for this.

  1. Changes in your estate and your personal situation: 3-5 years is enough time for major life changes to occur. You may have had a child, or your child may have gone from being a minor to a legal adult. If you do have minor children, the person you assigned as their guardian in the event of your death or incapacitation may no longer be available or desirable for that position. You may have new assets or properties that need to be accounted for. You may have moved to a different state, and bought property there that is governed under different rules. Whatever the case, it is good to check in every 3-5 years to make sure everything is still up to date, and to make any changes that need to be made.
  2. Changes in laws: Legislation is an ongoing process, and both state and federal laws surrounding estates and taxes tend to change fairly regularly. In the past 3-5 years, there have been extensive changes to both California estate laws and federal tax laws. These changes may compel you to make changes in your estate plan in order to best protect your property and assets, upon the advice of your estate planning attorney.

For more information on Benefits Of Estate Planning In California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (949) 287-5558 today.

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