PLANNING FOR LIFE'S "WHAT-IFS"

Estate planning involves the management and distribution of your assets and planning for incapacity. An estate plan consists of legal documents that put someone else in charge of your assets in case you lose physical or mental capacity and instructions for how to distribute your assets after you pass away.

Almost everyone should have an estate plan. Believe it or not, you have an estate. In fact, nearly everyone does. Your estate is comprised of everything you own— your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions.

Without a proper estate plan, California has a process to dispose of your assets. Unless you choose to plan, California has already chosen a plan for you. This plan is called PROBATE.

PROBATE is a legal term that comes from the Latin word for “to prove.” Basically, probate is the judicial process of proving the rightful heirs of an estate.

Probate begins the administration of an estate after the owner's passing. For the probate process to happen, someone needs to be appointed to oversee the deceased person's estate distribution. This person will either be named by the Will (if there is one) or a court will appoint him or her. Often, it’s a spouse, adult child, another family member or a close friend.

Probate is a time-consuming stressful process. It can range anywhere from nine months to several years. On average, most probates can be settled in about a year and a half, but again, a lot of factors come into play. Some things you can expect are that you and your family will experience loss of privacy and control and pay expensive administration costs (4-10% of gross estate). Everything is public and requires court approval.

NO! A will does not transfer property or retitle assets after someone passes away, so probate may be necessary before assets can be distributed to the beneficiaries.

In California, an estate may be able to avoid going through the probate process if:
- The estate value doesn’t exceed the small estate threshold.
- There is a Living Trust, and any assets outside it are valued at less than the small estate threshold (currently $184,500)
- Assets are set up to pass directly to beneficiaries (POD or TOD account)

A living trust is a legal document that details your wishes about the property held in the trust and how to distribute them to your beneficiaries.

A trust also avoids the costly and time-consuming process of probate because it is a private contract that transfers ownership of your property so the court does not have to.

The legal contract of a trust is made by a person called the TRUSTOR, (sometimes called grantor or settlor) appointing a person or company to manage assets for the benefit of another person. The person managing the assets is called the TRUSTEE and the person entitled to receive the assets is called the BENEFICIARY.

The main differences between wills and living trusts are what they can include and how they’re managed. However, both are key estate planning tools meant to protect and distribute assets to your loved ones.

A will is strictly concerned with what happens to your assets after you die but doesn’t house your assets in the meantime. On the other hand, a living trust holds your assets until a predetermined time and provides instructions for how they’ll be managed and distributed. Additionally, wills are subject to probate court. This means, while you may have outlined how you want your assets to be distributed, the decision is still ultimately up to the court. A living trust typically allows you to bypass probate court and distribute your assets exactly how you wish.

However, a will provides the opportunity to name a guardian for any minor children or dependents, designate power of attorney, and outline end-of-life wishes. A living trust doesn’t afford you these options.

A Basic Estate Plan Should Contain:
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· REVOCABLE LIVING TRUST that allows you to transfer your assets while avoiding probate, which saves your family time and money by not having to go through a court process to transfer your assets when you pass.

· LAST WILL AND TESTAMENT that "pours over" property into a trust when the will maker dies. A pour-over will is intended to guarantee that any assets which somehow were not included in the trust become assets of the trust upon the party's death.

· DURABLE POWER OF ATTORNEY that designates someone to manage your day-to-day financial and legal affairs. This person can be authorized to receive income, write checks, pay expenses, file your income taxes, and more

· ADVANCE HEALTH CARE DIRECTIVE that lets you put someone in charge of making healthcare decisions on your behalf and allows you to say which medical treatments you would or would not want to receive if you couldn't make your own choices.

Consult an experienced estate planning attorney who will most likely have an in-take consultation to discuss your goals, assets, beneficiaries, change of life circumstances to specifically tailor an estate plan to meet your specific needs.

“Do-it-yourself” wills often do not contain all of the necessary components as required by law and are frequently ruled invalid by the courts. A vaguely worded clause can result in lengthy legal battles.

Anyone who might benefit from the invalidation of your will can contest it, and if the courts decide in his or her favor your estate may be required to cover all legal costs. Remember, the few dollars you save now can cost your loved ones thousands of dollars later.