1. WHAT IS ESTATE PLANNING?
Estate planning is a process. It includes people -your household, other people and oftentimes charitable companies of your option. It likewise involves your assets and all the numerous kinds of ownership and title that those assets might take.
As you prepare your estate, you will think about:
* How your assets will be managed for your benefit if you are not able to do so
* When certain possessions will be moved to others, either during your lifetime, at your death, or at some point after your death
* To whom those properties will pass
Estate planning likewise addresses your welfare and needs, planning for your own personal care and health care if you are no longer able to take care of yourself. Like lots of people, you might at first think that estate planning is simply the writing of a will. But it encompasses a lot more. As you will see, estate planning may involve financial, tax, medical and company planning. A will is one part of that planning process, but other documents are required to fully resolve your estate planning requirements. The function of this product is to summarize the estate planning process and how it can deal with and satisfy your goals and goals.
As you consider it further, you will recognize that estate planning is a dynamic process. Simply as individuals, possessions and laws change, it may well be essential to change your estate plan every now and then to reflect those changes.
2. WHAT IS INVOLVED IN ESTATE PLANNING?
In beginning to consider your estate strategy, I ask my clients to complete a short questionnaire to address the very first of the following questions and during our initial meeting we talk about the other questions:
* What are my assets and what is their approximate value?
* Whom do I want to get those properties -and when?
* Who should handle those properties if I can not, either throughout my life time or after my death?
* Who should have the responsibility for the care of my minor kids, if any, if I become incapacitated or die?
* If I can not look after myself, who should make choices on my behalf worrying my care and well-being?
3. WHO NEEDS ESTATE PLANNING?
Whatever the size of your estate, you ought to designate the person who, in case of your incapacity, will have the obligation for the management of your possessions and your care, including the authority to make health care choices in your place. How that is achieved is discussed listed below in this material. If your estate is little in worth, you might focus just upon who is to receive your assets after your death and who should be in charge of its management and circulation.
If your estate is bigger, we will talk about with you not only who is to receive your properties and when, however likewise different methods to protect your assets for your beneficiaries and to lower or hold off the quantity of estate tax which otherwise may be payable on your death.
If one does no planning, then California law offers the court appointment of individuals to take responsibility for your individual care and assets. California likewise provides for the distribution of properties in your name to your heirs pursuant to a set of guidelines to be followed if you pass away without a will; this is called "intestate succession." If you pass away without a will and if you have any relatives (whether through your own family or that of your partner), regardless of how remote, they will be your successors. Nonetheless, they might not be individuals you would want to inherit from you; for that reason, a living trust or a will is the more suitable approach.
4. WHAT IS INCLUDED IN MY ESTATE?
Your estate consists of all property or interests in property which you own. The most basic examples are those properties which remain in your name alone, such as a checking account, real estate, stocks and bonds, furniture, home furnishings and precious jewelry.
You might likewise hold property in many types of title aside from in your name alone. Joint occupancy is a typical kind of ownership which takes assets far from control by will or living trust. Recipient designations on securities accounts and checking account are options which must be carefully thought about as well.
Finally, possessions which have recipient designations, such as life insurance, IRAs, qualified retirements strategies and some annuities are really important parts of your estate which require mindful coordination with your other properties in establishing your estate strategy.
The worth of your estate amounts to the "reasonable market value" of each property that you own, minus your debts, including a home loan on your house or a loan on your cars and truck.
The worth of your estate is essential in identifying whether, and to what level, your estate will undergo estate taxes upon your death. Planning for the resources required to satisfy that obligation at your death is another vital part of the estate planning process.
5. WHAT IS A WILL?
A will is a traditional legal document which works just at your death to:
* Name people (or charitable organizations) to receive your properties upon your death (either by straight-out gift or in trust).
* Nominate an executor, designated and supervised by the probate court, to manage your estate, pay debts and expenses, pay taxes, and disperse your estate in a liable way and in accordance with your will.
* Nominate the guardians of the individual and estate of your minor children, to care and provide for your small children.
Properties or interests in home in your name alone at your death will be subject to your will and based on the administration of the court of probate, generally in the county where you live at your death.
6. WHAT IS A REVOCABLE LIVING TRUST?
A revocable living trust is also frequently described as a revocable inter vivos trust, a grantor trust or, simply, a living trust. A living trust might be changed or revoked by the individual creating it (commonly known as "trustor," "grantor," or "settlor") at any time throughout the trustor's lifetime, as long as the trustor is skilled.
A trust is a written contract between the specific producing the trust and the individual or institution named to handle the assets held in the trust (the "trustee"). Oftentimes, it is appropriate for you to be the preliminary trustee of your living trust, up until management help is expected or needed, at which point your trust must designate a private, bank or trust business to act in your place.
The terms of the trust ended up being irrevocable upon the trustor's death. Because the trust consists of provisions which attend to the distribution of your assets on and after your death, the trust functions as an alternative to your will, and eliminates the requirement for the probate of your will with regard to those assets which were kept in your living trust at your death.
You should perform a will even if you have a living trust. That will is normally a "pour over" will which offers the transfer of any assets kept in your name at your death to the trustee of your living trust, so that those properties might be distributed in accordance with your desires as stated in your living trust.
7. WHAT IS PROBATE?
Probate is the court-supervised process developed under California law which has as its objective the transfer of your properties at your death to the beneficiaries set forth in your will, and in the way recommended by your will. It likewise provides for the fairly quick decision of legitimate claims of any financial institutions who have claims against your possessions at your death.
At the beginning of probate administration, a petition is filed with the court, typically by the person or institution named in your will as executor. After notice is provided, and a hearing is held, your will is admitted to probate and an executor is selected. If you pass away "intestate" (that is, without a will), your estate is still based on court of probate administration and the individual selected by the court to manage your estate is called the "administrator.".
If the assets in your name alone at your death do not include an interest in real estate and have an overall worth of less than $100,000, then usually the recipients under your will may follow a statutory procedure to effect the transfer of those assets pursuant to your will, subject to your financial obligations and expenditures, without an official court-supervised probate administration.
A probate has advantages and disadvantages. The probate court is accustomed to resolving disagreements about the circulation of your possessions in a relatively expeditious style and in accordance with specified rules. In addition, you are ensured that the actions and accountings of your executor will be reviewed and authorized by the probate court.
Drawbacks of a probate include its public nature; your estate strategy and the value of your assets becomes a public record. Likewise, due to the fact that lawyer's fees and executor's commissions are based upon a statutory fee schedule calculated upon the gross (not the internet) value of the assets being probated, the expenses may be higher than the costs sustained by a comparable estate managed and distributed under a living trust. Time can likewise be a factor; frequently circulations can be made pursuant to a living trust faster than in a probate case.
8. TO WHOM SHOULD I LEAVE MY ASSETS?
Once you have actually identified who must receive your possessions at your death, I can assist you clarify and appropriately recognize your beneficiaries. For example, it is essential to clearly identify by appropriate name any charitable companies you want to provide for; many have comparable names and in some families, people have similar and even similar names.
It is also important for you to consider alternative circulation of your assets on the occasion that your main recipient does not endure you.
When it comes to recipients who by factor of age or other imperfection might not be able to deal with possessions distributed to them outright, trusts for their benefit may be produced under your will or living trust.
9. WHOM SHOULD I AS MY EXECUTOR OR TRUSTEE?
After your death, the executor of your will and the trustee of your living trust serve almost identical functions. Both are responsible for making sure that your desires, as set forth in your will or living trust, are implemented. Although your administrator is generally based on direct court guidance, both the executor and the trustee have similar fiduciary duties. The trustee of your living trust may assume duties under that file while you are living.
While you may serve as the preliminary trustee of your living trust, if you become incapable of working as a trustee, the designated follower trustee will then step in to manage your possessions for your advantage. An administrator or trustee might be a partner, adult kids, other family members, household buddies, service associates or a professional fiduciary such as a bank.
I discuss this matter will my clients. There are a variety of concerns to think about. For instance, will the visit of one of your adult children trigger unnecessary stress in his or her relations with brother or sisters? What conflicts of interest are produced if a service partner or partner is called as your executor or trustee? Will the individual named as executor or follower trustee have the time, organizational ability and experience to do the job efficiently?
10. HOW SHOULD I PROVIDE FOR MY MINOR CHILDREN?
A minor child is a kid under 18 years of age. If both moms and dads are deceased, a small child is not lawfully qualified under California law to care for himself or herself. In your will, therefore, you ought to nominate a guardian of the person of your minor children to monitor that kid and be accountable for his or her care up until the kid is 18 years of ages.
Such an election can avoid a "tug of war" in between well-meaning member of the family and others if a guardian is required.
A minor is also not legally get more info qualified to manage his or her own home. Possessions transferred outright to a minor must be held for the small's benefit by a guardian of the kid's estate, up until the kid achieves 18 years of age. You ought to choose such a guardian in your will also. In providing for small children in your estate strategy, you should think about using a trust for the child's benefit, to be held, administered and distributed for the child's advantage up until the child is at least 18 years old or some other age as you might decide. You might also think about a custodian account under the California Uniform Transfers to Minors Act as an alternative in making particular gifts to minors.
11. WHEN DOES ESTATE PLANNING INVOLVE TAX PLANNING?
Estate taxes are imposed upon an estate which has a net worth, in 2002, of $1,000,000 or more. Under present law, that quantity will increase, in uneven increments, to $3,500,000 in 2009. Estate taxes are set up to be reversed for 2010. In 2011, estate tax will revert to the law which existed prior to the enactment of the 2001 tax law changes, so that an estate which has a net value of $1,000,000 or more will undergo estate taxes. (See Estate Planning Under the 2001 Tax Relief Act: What To Know And What To Do). For estates which approach or surpass the exemption quantity, significant estate taxes can be saved by correct estate planning, typically before death and, when it comes to married couples, before the death of the very first spouse. Estate planning for tax functions must consider not just estate taxes, however also income, gift, home and generation-skipping taxes as well. Qualified legal recommendations about taxes should be obtained during the estate planning pr!ocess.
12. HOW DOES THE WAY IN WHICH I HOLD TITLE MAKE A DIFFERENCE?
The nature of your possessions and how you hold title to those properties is a critical factor in the estate planning process. Prior to you alter title to a property, you need to understand the tax and other consequences of any proposed change. I will be able to recommend you about such matters.
Community residential or commercial property and different home.
If you are wed, properties made by either you or your partner while married and while a homeowner of California are neighborhood property. On the other hand, a married individual may own separate residential or commercial property as a result of possessions owned prior to marriage or gotten by present or inheritance during marital relationship. There are substantial tax considerations which need to be addressed in the estate planning procedure with regard to both neighborhood home and different residential or commercial property. There are also significant property interests to think about.
Different residential or commercial property can be "transmuted" (that is, changed) to neighborhood home by a written agreement signed by both spouses and prepared in conformity with California law.
It is necessary to look for skilled legal advice when identifying what character your home is and how the residential or commercial property ought to be entitled.
Joint Tenancy Property.
No matter its source, if a residential or commercial property is held in joint occupancy, it will pass to the surviving joint occupant by operation of law upon the death of the first joint occupant. On the other hand, residential or commercial property held as neighborhood residential or commercial property or as tenants in typical, will be subject to the will of a departed owner.
13. WHAT ARE OTHER METHODS OF LEAVING PROPERTY?
A number of properties are transferred at death by recipient classification, such as:.
* Life insurance proceeds.
* Qualified or non-qualified retirement plans, consisting of 401( k) plans and IRAs.
* Certain "trustee" savings account.
* "Transfer on death" (or "TOD") securities accounts.
* "Pay on death" (or "POD") possessions, a typical title on U.S. Savings bonds.
These beneficiary classifications need to be thoroughly coordinated with your overall estate strategy. Your will does not govern the circulation of these possessions.
14. WHAT IF I BECOME UNABLE TO CARE FOR MYSELF?
If you do not make any arrangements in advance, a court-supervised conservatorship case might be needed if you end up being incapacitated.
Conservatorships are proceedings which permit the court to appoint the individual responsible for your care and for the management of your estate if you are not able to do so yourself.
You should, for that reason, choose the individual or persons you want to look after you and your estate in case you become incapable of managing your assets or offering your own care.
With regard to the management of your possessions, the trustee of your living trust will provide the needed management of those assets held in trust. Nevertheless, to deal with assets which might not have actually been transferred to your living trust prior to your incapacity or which you may get after inability, a durable power of attorney for residential or commercial property management must be thought about. In such a power, you appoint another person (the "attorney-in-fact") to make residential or commercial property management choices in your place. The attorney-in-fact manages your assets and functions much as a conservator of your estate would work, however without court guidance. The authority of the attorney-in-fact to handle your properties stops at your death.
A durable power of attorney for health care enables your attorney-in-fact to make health care choices for you when you can no longer make them yourself. It might likewise consist of declarations of dreams worrying such matters as life sustaining treatment and other healthcare problems and directions concerning organ donation, disposition of remains and your funeral.
15. WHO SHOULD HELP ME WITH MY ESTATE PLANNING DOCUMENTS?
Can I Do It Myself?
Wills and trusts are legal documents which should be prepared just by a certified lawyer. You need to watch out for organizations or offices who are staffed by non-lawyer personnel and who promote "one size fits all" living trusts or living trust packages. An estate strategy produced by someone who is not a qualified lawyer can have massive and pricey repercussions for your estate and may not attain your goals and goals. However, many other professionals and business agents may become associated with the estate planning procedure. For example, licensed accountants, life insurance sales representatives, bank trust officers, monetary coordinators, workers supervisors and pension consultants typically take part in the state planing process. Within their locations of competence, these experts can help in planning your estate.
16. WHAT ARE COSTS INVOLVED IN ESTATE PLANNING?
The costs of estate planning depend on your private circumstances and the intricacy of paperwork and planning needed to accomplish your objectives and objectives. The expenses normally will include my charges for putting your financial info into my computerized estate planning program which enables me to graphically reveal you the impacts of alternate strategies, discussing your estate plan with you and for preparing your will, trust contract or other legal documents which you may require.