A Brief Q. and A. on Estate Planning

Q: What is Estate Planning? What does the term, Estate Planning mean?

A: Depending on who you are talking to that term can have a broad range of meanings. Many different professionals say that they “do” estate planning.

As an Attorney it refers to helping my clients put into place the appropriate legal documents necessary to reach their goals and objectives. The purpose of Estate Planning documents are to ensure that one’s affairs are handled in accordance with their wishes both after death, but also during their lifetime.

Q: What are the components of a Good Estate Plan?

A: Well it really depends on the person, their circumstances and their goals.

Generally speaking a “plan” is going to be comprised of more than one document. Those different documents will work separately and in conjunction to accomplish the various goals of the clients both during their lifetime and after their death.

Q: What are the different documents?

A: The different documents that could be utilized in any given estate plan are a Will, a Trust, a Pour-Over Will, a Durable Power of Attorney, a Health Care Power of Attorney and various supporting documents.

The documents are the legal manifestations of what the person wants to have in place in the event that they need help during their lifetime due to their incapacity and of course after they have passed away.

Q: How do these work together in a plan?

A: Generally, a client would either have a Will based estate plan or they will have a Trust based estate plan.

The difference between the two really comes down to, what is a Will and how does it work as opposed to, what is a Trust and how does that work.

The other documents that would be needed with either version are what will complete the “plan”. The other documents will either support the main document or would accomplish a goal that that main document cannot accomplish.

Some documents are only effective during lifetime, some documents are only effective upon death and some are effective both during life and after death.

Q: Can you explain the difference between a Will and a Trust?

A: Absolutely. A Will is a document that specifies who your family is, who you want to leave your assets to when you die, how you want to leave them those assets, and it nominates an executor – or the person who will take care of your affairs when you die. If you have minor children, then the Will would also nominate potential guardians for them.

The main things to remember about a Will as your primary Estate Planning document, is that #1, it has no legal effect during your lifetime. A Will only becomes effective upon your date of death. And, #2, depending on what you own, how it is titled and the cumulative value, a Will will not avoid Probate. In California, if a person dies and they have a gross fair market value of more than $184,500.00 worth of assets just in their name, their estate must go through Probate.

A Will does not avoid Probate – it merely tells the court what you wanted.

A Trust on the other hand is really like a contract. It goes into effect immediately upon execution. A Trust, like a Will, specifies who your family is, who you want to leave your assets to and how after you are gone, and who you want to manage your affairs when you cannot.

A big part of how a Trust works, is that many of your assets, like a home or other real estate, bank and investment accounts, are transferred from your name as an individual into your name as Trustee of your Trust.

It is through this combination of having the document called Trust with all the appropriate legal provisions it needs to have and having your assets either properly titled in the name of the Trust, or potentially designated to the Trust, that your estate can avoid Probate when you pass away.

A couple of things to remember about a Trust, is that a properly created and funded Trust, #1 goes into effect immediately, and #2 avoids Probate when you pass away.

The aspect about the Trust becoming effective immediately should not be overlooked, as it is by that aspect that should you lose capacity during your lifetime, either due to illness or accident, the Trust is there to provide for you for the rest of your life, and this avoids the possibility that one of your loved ones may have to go to court and become your Conservator.

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