It’s Estate Planning Awareness Week – although 2020 really feels like the Estate Planning Awareness YEAR! Our health, family, and future have been top of mind for all of us. In honor of Estate Planning Awareness Week, below are my concise answers to the top 10 estate planning questions that I get asked most frequently:
1. What does an estate plan consist of?
An estate plan consists of four key documents: A Revocable Living Trust, a Pour-Over Will, an Advanced Health Care Directive, and a Power of Attorney.
2. If I have a Will, why do I need a Trust?
Your trust will allow you to avoid probate, a will does not.
3. But if I have a Trust, then why do I need a Will?
A pour-over will becomes effective at your death and acts to catch any assets you failed to put in your trust, and essentially pour them into your trust at your death so that you can …. you guessed it, avoid probate! Your will is also where you appoint guardians for your minor children.
4. Why do we want to avoid probate?
Many reasons, but the primary reasons are Fees, Time, Choice and Privacy.
Fees: In California if you pass away without a trust, your heirs will be required to go to probate court and the costs and fees of probate are set by statute and are upwards of 10x the cost of setting up an estate plan. Check out the probate calculator link to estimate your probate fees. https://tldlaw.com/probate-calculator/
Time: The time it takes to go through probate (especially while our courts are backed up due to the Pandemic) is significantly longer than a typical trust administration. A typical trust administration can be completed in a few months (or sooner) whereas probate can take well over a year and upwards of several years.
Choice: When you prepare an estate plan, you get to choose who’s in charge when you are no longer around and where your assets will go at death. Without an estate plan the court and California law will decide this.
Privacy: Probate means that your estate, heirs, and assets will become public record as part of a court proceeding.
5. I don’t have significant assets and I don’t own any real estate, why do I need an estate plan?
There are many reasons, but one big one is that even if you aren’t concerned about a probate at your death, if you don’t have estate planning documents and you were to become incapacitated (e.g. fall into a coma), your family would have to go to court to obtain a conservatorship over you, or as we call it a “lifetime probate” which is costly, time consuming, and stressful for your family.
6. Which assets go in my Trust?
All of your real estate (primary residence, rental property, vacation home) all of your bank accounts, all of your brokerage accounts and investment accounts, business interests, loans, and digital assets.
What about Retirement Accounts?
Your retirement accounts should all have a designated beneficiary. It is a form that you fill out naming who will get the account on your death. Check your designated beneficiaries and make sure they are up-to-date. If not, then the account may become subject to probate at your death. The same is true for life insurance and any other types of accounts wherein you name a designated beneficiary on death. These accounts will not go through probate if you have proper designated beneficiaries. Make sure the beneficiaries you have named are still living!
7. How do I put my assets into my Trust?
Your attorney should assure that your real estate is deeded into your trust, but you are responsible for connecting all of your other assets to your trust. Your attorney should give you a Certification of Trust, which you can take to your bank or other financial institution and transfer your accounts into your trust. A good attorney will also give you detailed instructions on how to transfer each asset that you have.
8. Once I have an estate plan, do I need to do anything in future?
Yes, estate planning is not a set it and forget it type plan, you should be checking in on your estate plan every few years and when there are any major life events (e.g. birth, death, divorce, marriage).
9. I recently got divorced, how does that affect my estate plan?
You will need a new trust for yourself and you will need to update your other estate planning documents to make sure your ex-spouse isn’t named as your agent on anything.
10. Does putting my property into a trust allow me to avoid creditors?
Putting your assets into a revocable living trust does not provide you with asset protection or allow you to avoid creditors. However, there are other advanced estate planning strategies, that can accomplish this.
Disclaimer: This is not legal advice, but an article with tips meant to show you the importance of estate planning. Contact an estate planning attorney for a detailed discussion on each of these very popular questions.