1. WHAT IS ESTATE PLANNING?
Estate planning is a process. It includes people -your family, other people and in many cases charitable organizations of your choice. It likewise involves your assets and all the different forms of ownership and title that those assets might take.
As you prepare your estate, you will consider:
* How your assets will be managed for your advantage if you are unable to do so
* When particular properties will be moved to others, either during your lifetime, at your death, or at some point after your death
* To whom those possessions will pass
Estate planning also resolves your well-being and needs, planning for your own individual care and health care if you are no longer able to look after yourself. Like lots of people, you may in the beginning believe that estate planning is simply the writing of a will. But it incorporates a lot more. As you will see, estate planning might include financial, tax, medical and business planning. A will is one part of that planning process, however other files are needed to completely resolve your estate planning needs. The function of this material is to sum up the estate planning procedure and how it can address and satisfy your goals and objectives.
As you consider it even more, you will recognize that estate planning is a vibrant procedure. Just as individuals, assets and laws change, it might well be necessary to adjust your estate strategy occasionally to reflect those modifications.
2. WHAT IS INVOLVED IN ESTATE PLANNING?
In beginning to consider your estate strategy, I ask my clients to finish a brief questionnaire to address the very first of the following concerns and throughout our preliminary conference we go over the other questions:
* What are my possessions and what is their approximate worth?
* Whom do I want to receive those assets -and when?
* Who should manage those possessions if I can not, either during my lifetime or after my death?
* Who should have the obligation for the care of my small kids, if any, if I end up being incapacitated or pass away?
* If I can not look after myself, who should make choices on my behalf concerning my care and welfare?
3. WHO NEEDS ESTATE PLANNING?
Whatever the size of your estate, you need to designate the person who, in the event of your incapacity, will have the responsibility for the management of your possessions and your care, consisting of the authority to make healthcare choices on your behalf. How that is achieved is gone over listed below in this product. If your estate is small in value, you might focus just upon who is to get your possessions after your death and who ought to supervise of its management and distribution.
If your estate is bigger, we will talk about with you not just who is to get your possessions and when, however also numerous methods to protect your assets for your beneficiaries and to minimize or hold off the quantity of estate tax which otherwise might be payable on your death.
If one does no planning, then California law offers the court visit of individuals to take duty for your personal care and properties. California also attends to the distribution of assets in your name to your heirs pursuant to a set of rules to be followed if you pass away without a will; this is known as "intestate succession." If you die without a will and if you have any relatives (whether through your own household or that of your partner), despite how remote, they will be your heirs. Nonetheless, they may not be individuals you would wish to inherit from you; therefore, a living trust or a will is the more effective technique.
4. WHAT IS INCLUDED IN MY ESTATE?
Your estate consists of all residential or commercial property or interests in home which you own. The most basic examples are those assets which are in your name alone, such as a bank account, real estate, stocks and bonds, furniture, furnishings and jewelry.
You may likewise hold residential or commercial property in many forms of title other than in your name alone. Joint occupancy is a common type of ownership which takes possessions far from control by will or living trust. Recipient classifications on securities accounts and bank accounts are alternatives which should be thoroughly thought about as well.
Lastly, properties which have beneficiary classifications, such as life insurance coverage, IRAs, qualified retirements plans and some annuities are very vital parts of your estate which require careful coordination with your other assets in establishing your estate strategy.
The value of your estate is equal to the "reasonable market value" of each asset that you own, minus your debts, including a mortgage on your house or a loan on your car.
The value of your estate is important in determining whether, and to what level, your estate will undergo estate taxes upon your death. Planning for the resources needed to satisfy that responsibility at your death is another important part of the estate planning procedure.
5. WHAT IS A WILL?
A will is a standard legal file which is effective just at your death to:
* Name individuals (or charitable organizations) to get your possessions upon your death (either by outright gift or in trust).
* Nominate an administrator, designated and supervised by the court of probate, to handle your estate, pay debts and expenditures, pay taxes, and distribute your estate in an accountable way and in accordance with your will.
* Nominate the guardians of the individual and estate of your small children, to care and offer your small children.
Properties or interests in property in your name alone at your death will undergo your will and based on the administration of the court of probate, usually in the county where you reside 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 withdrawed by the individual developing it (typically called "trustor," "grantor," or "settlor") at any time during the trustor's lifetime, as long as the trustor is competent.
A trust is a written contract between the individual producing the trust and the individual or organization called to handle the possessions held in the trust (the "trustee"). In a lot of cases, it is proper for you to be the initial trustee of your living trust, until management help is expected or needed, at which point your trust must designate an individual, bank or trust business to act in your location.
The terms of the trust become irrevocable upon the trustor's death. Due to the fact that the trust includes provisions which offer the circulation of your properties on and after your death, the trust acts as a replacement for your will, and gets rid of the requirement for the probate of your will with respect to those properties which were held in your living trust at your death.
You need to carry out a will even if you have a living trust. That will is typically a "put over" will which attends to the transfer of any assets held in your name at your death to the trustee of your living trust, so that those possessions may be distributed in accordance with your wishes as set forth in your living trust.
7. WHAT IS PROBATE?
Probate is the court-supervised procedure established under California law which has as its goal the transfer of your assets at your death to the beneficiaries set forth in your will, and in the way recommended by your will. It also offers the relatively quick decision of legitimate claims of any creditors who have claims against your possessions at your death.
At the start of probate administration, a petition is submitted with the court, normally by the individual or organization named in your will as executor. After notice is given, and a hearing is held, your will is admitted to probate and an administrator is selected. If you pass away "intestate" (that is, without a will), your estate is still based on probate court administration and the person appointed by the court to manage your estate is called the "administrator.".
If the possessions 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 normally the beneficiaries under your will may follow a statutory procedure to effect the transfer of those assets pursuant to your will, subject to your debts and expenditures, without an official court-supervised probate administration.
A probate has advantages and disadvantages. The probate court is accustomed to dealing with disputes about the circulation of your properties in a fairly expeditious fashion and in accordance with defined guidelines. In addition, you are ensured that the actions and accountings of your executor will be reviewed and authorized by the probate court.
Disadvantages of a probate include its public nature; your estate strategy and the worth of your possessions becomes a public record. Also, due to the fact that lawyer's charges and executor's commissions are based upon a statutory cost schedule computed upon the gross (not the net) worth of the possessions being probated, the costs may be higher than the costs sustained by a similar estate handled and distributed under a living trust. Time can likewise be a factor; typically distributions can be made pursuant to a living trust faster than in a probate proceeding.
8. TO WHOM SHOULD I LEAVE MY ASSETS?
Once you have identified who should receive your possessions at your death, I can assist you clarify and properly recognize your beneficiaries. For example, it is most important to plainly determine by proper name any charitable organizations you want to offer; lots of have similar names and in some families, individuals have comparable or perhaps identical names.
It is also essential for you to consider alternative circulation of your properties in case your main recipient does not endure you.
As for beneficiaries who by reason of age or other infirmity may not be able to deal with possessions dispersed to them outright, trusts for their advantage may be created under your will or living trust.
9. WHOM SHOULD I AS MY EXECUTOR OR TRUSTEE?
After your death, the executor of your will check here and the trustee of your living trust serve almost similar functions. Both are responsible for ensuring that your desires, as stated in your will or living trust, are executed. Although your administrator is generally based on direct court supervision, both the executor and the trustee have comparable fiduciary duties. The trustee of your living trust might assume duties under that document while you are living.
While you may serve as the preliminary trustee of your living trust, if you become incapable of operating as a trustee, the designated follower trustee will then action in to handle your possessions for your advantage. An administrator or trustee might be a spouse, adult kids, other loved ones, household friends, company associates or a professional fiduciary such as a bank.
I discuss this matter will my clients. There are a variety of concerns to consider. For example, will the appointment of among your adult kids trigger excessive tension in his or her relations with brother or sisters? What conflicts of interest are created if a service partner or partner is named as your executor or trustee? Will the individual called as administrator or successor trustee have the time, organizational ability and experience to do the job effectively?
10. HOW SHOULD I PROVIDE FOR MY MINOR CHILDREN?
A minor child is a child under 18 years of age. If both parents are deceased, a minor kid is not lawfully qualified under California law to care for himself or herself. In your will, for that reason, you should nominate a guardian of the individual of your small kids to supervise that kid and be accountable for his/her care until the kid is 18 years old.
Such an election can prevent a "yank of war" between well-meaning relative and others if a guardian is required.
A small is likewise not legally qualified to handle his or her own property. Assets moved outright to a minor must be held for the small's benefit by a guardian of the kid's estate, up until the kid obtains 18 years of age. You must nominate such a guardian in your will too. In providing for small children in your estate plan, you need to consider the use of a trust for the kid's advantage, to be held, administered and distributed for the kid's benefit till the kid is at least 18 years old or some other age as you might choose. You might also think about a custodian account under the California Uniform Transfers to Minors Act as an option in making specific presents to minors.
11. WHEN DOES ESTATE PLANNING INVOLVE TAX PLANNING?
Estate taxes are imposed upon an estate which has a net value, in 2002, of $1,000,000 or more. Under current law, that quantity will increase, in uneven increments, to $3,500,000 in 2009. Estate taxes are arranged to be repealed for 2010. In 2011, estate tax will revert to the law which existed before the enactment of the 2001 tax law modifications, 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 exceed the exemption quantity, considerable estate taxes can be conserved by appropriate estate planning, typically prior to death and, in the case of married couples, before the death of the very first spouse. Estate preparing for taxation purposes should consider not just estate taxes, but likewise earnings, present, residential or commercial property and generation-skipping taxes as well. Qualified legal advice about taxes need to be acquired during the estate planning pr!ocess.
12. HOW DOES THE WAY IN WHICH I HOLD TITLE MAKE A DIFFERENCE?
The nature of your assets and how you hold title to those assets is a crucial consider the estate planning procedure. Prior to you change title to an asset, you need to understand the tax and other consequences of any suggested change. I will be able to advise you about such matters.
Neighborhood residential or commercial property and different home.
If you are wed, properties made by either you or your partner while married and while a citizen of California are neighborhood property. On the other hand, a married individual may own separate property as an outcome of possessions owned prior to marital relationship or received by present or inheritance during marital relationship. There are substantial tax factors to consider which need to be resolved in the estate planning procedure with regard to both neighborhood property and different home. There are likewise considerable residential or commercial property interests to consider.
Separate home can be "transmuted" (that is, altered) to community property by a composed arrangement signed by both partners and drafted in conformity with California law.
It is essential to look for qualified legal recommendations when determining what character your property is and how the home must be titled.
Joint Tenancy Property.
No matter its source, if a residential or commercial property is held in joint occupancy, it will pass to the making it through joint tenant by operation of law upon the death of the very first joint tenant. On the other hand, home held as community property or as renters in common, will go through the will of a deceased owner.
13. WHAT ARE OTHER METHODS OF LEAVING PROPERTY?
A variety of assets are moved at death by beneficiary classification, such as:.
* Life insurance earnings.
* Qualified or non-qualified retirement strategies, including 401( k) strategies and IRAs.
* Certain "trustee" bank accounts.
* "Transfer on death" (or "TOD") securities accounts.
* "Pay on death" (or "POD") properties, a common title on U.S. Savings bonds.
These recipient classifications must be thoroughly collaborated with your overall estate strategy. Your will does not govern the circulation of these assets.
14. WHAT IF I BECOME UNABLE TO CARE FOR MYSELF?
If you do not make any plans ahead of time, a court-supervised conservatorship proceeding might be needed if you become incapacitated.
Conservatorships are proceedings which permit the court to appoint the individual accountable for your care and for the management of your estate if you are unable to do so yourself.
You should, therefore, pick the person or persons you want to care for you and your estate in case you end up being incapable of handling your possessions or offering your own care.
With regard to the management of your assets, the trustee of your living trust will provide the needed management of those properties held in trust. However, to deal with possessions which might not have actually been moved to your living trust prior to your incapacity or which you may receive after incapacity, a resilient power of attorney for home management need to be thought about. In such a power, you appoint another individual (the "attorney-in-fact") to make property management decisions on your behalf. The attorney-in-fact manages your possessions and functions much as a conservator of your estate would work, but without court supervision. The authority of the attorney-in-fact to manage your possessions ceases at your death.
A resilient power of attorney for health care allows your attorney-in-fact to make health care decisions for you when you can no longer make them yourself. It may likewise include declarations of desires concerning such matters as life sustaining treatment and other health care problems and directions concerning organ donation, personality of remains and your funeral service.
15. WHO SHOULD HELP ME WITH MY ESTATE PLANNING DOCUMENTS?
Can I Do It Myself?
Wills and trusts are legal files which must be prepared just by a certified lawyer. You must be wary of organizations or offices who are staffed by non-lawyer workers 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 effects for your estate and may not achieve your goals and goals. Nevertheless, many other professionals and organisation agents may become associated with the estate planning process. For example, licensed accountants, life insurance salespersons, bank trust officers, monetary planners, workers supervisors and pension consultants typically take part in the state planing process. Within their locations of know-how, these experts can assist in planning your estate.
16. WHAT ARE COSTS INVOLVED IN ESTATE PLANNING?
The expenses of estate planning depend on your specific situations and the intricacy of paperwork and planning required to accomplish your goals and goals. The costs generally will include my charges for putting your monetary information into my digital estate planning program which enables me to graphically reveal you the effects of alternate strategies, discussing your estate plan with you and for preparing your will, trust contract or other legal documents which you may require.