California has laws in place for those who die without a will or trust. It is referred to as dying intestate. These laws on intestacy specify who is to receive your property at your death.

Under intestacy laws, property generally passes to your surviving spouse and then other relatives. If you want to leave some of your property to a friend or to a charitable organization, you will have to execute a will, as intestacy laws do not consider these outcomes.

Realistic Situations Addressed

• “I’m single. What will happen to my property, real estate and personal property when I die?”
• “I’m divorced and have remarried. Does my former spouse have any claim to my property?”
• “Do my children from my former spouse have any claim to my property?”
• “I have children with my new spouse, who gets the property when I die?”

If you die without a will or trust, the State will answer all of these questions rather than you. Most of us would prefer that we are the ones who make those decisions, and YOU CAN if you have a will or trust in place.

Now is the time to plan for how you want distribution of your estate.

A durable power of attorney (DPA) is a document that when properly executed will allow an agent to act on your behalf. A DPA for property or financial management is a simple and reliable way to arrange for someone that you trust to make your financial decisions should you become unable to do so yourself.

Avoid Court Appointed Trustee

If you do not have a DPA and become incapable of managing your affairs, a courtproceeding will be required to give your loved ones authority over your financial affairs. This can be an expensive and public process.

Necessary for Married Couples

Many married couples think that they do not need such a document because everythingis in both names. The truth is that your spouse has limits on his/her ability to deal with affairs, particularly on the selling of property owned by both of you.

Financial DPA Areas of Coverage

The following is a list of some of the areas covered by a DPA for financial affairs: real and personal property, securities, commodity futures and options, financial institutions, business operations, insurance and annuities, retirement plans, estate, trust and other beneficiary transactions, powers to create, modify and revoke trusts, tax matters, personal and family maintenance, pets, funeral and burial, gifts, government benefits, nomination of conservator.

As you can see, a DPA is very detailed. Therefore, it is an effective instrument in managing your financial affairs when you cannot do it for yourself.

Healthcare directives are included in an estate plan.

These documents allow your agent to direct a physician to withhold or withdraw life- sustaining procedures in future circumstances should you be incapable of making the decision yourself.

Uphold a Patient’s Right to Make End of Life Decisions

They are legally binding documents. In fact, many medical facilities ask if a patient has a healthcare directive during the admission process. Most, if not all, jurisdictions now recognize a patient’s right to make these decisions in advance of a terminal condition, if death is imminent, and/or if life-sustaining measures serve only to postpone death.

Doctor’s View of HCDs

When acting pursuant to a properly prepared and executed healthcare directive, a physician who withholds or withdraws life-sustaining measures is protected from civil and criminal liability. Healthcare directives must be prepared and executed pursuant to stringent state statues to be valid and effective. It should include authorization for your agent to obtain your medical records under federal and state law.

The acronym for the authorization is HIPPA and CIMA.

Revocable living trusts (RLT) may be called Intervivos Trusts (meaning made during your lifetime), Family Trusts, or just Trusts. These designations all mean the same thing.

A revocable living trust (RLT) is a trust that is established and maintained during the creator’s (trustor) lifetime and may be changed, modified, and even terminated during the life of its creator. In many respects a trust is similar to a will in that it provides direction on who is to receive your property upon your death.

Is an RLT Just a Tax loophole that the Government may Close Down?

No. The RLT has been authorized by the law for centuries. The RLT can be utilized to reduce or eliminate estate taxes based on the tax laws in effect at the death of the trustor.

Is an RLT Recommended for a Single Person?

Yes. If you are widowed, divorced, or unmarried, an RLT protects your estate. It completely eliminates probate, while providing you with the ability to direct who receives your property upon your death without the need for the time consuming and expensive process of probate.

Are There any Major Disadvantages in Having an RLT?

No. You have complete control of all assets in your trust, and you are free to manage your trust in any way. Also, because your trust is revocable, you retain the right to make any changes in it while you are alive and competent.

As the name implies an irrevocable trust is established and maintained during the creator’s (trustor) lifetime, but it cannot be changed once it’s established.

An irrevocable trust transfers ownership of the property put into the irrevocable trust and the trustor cannot be the trustee, the new owner of the property. In other words, once it is formed, you have no control of the property.

One Possible Advantage

Irrevocable trusts have a unique role in estate planning but are not often used; however, one possible advantage of an irrevocable trust is that property put into the trust is not counted as part of your estate upon your death. That can possibly save thousands of dollars in taxes for a very large estate and should be considered by those that have substantial wealth.

Wills

A will does not take effect until you die. A will directs who should receive your property upon your death. It also designates a person or persons who will be in charge of carrying out all of the directions that are provided in your will.

Living Trust

A living trust is a binding legal agreement in which a person called a ‘trustee’ owns, maintains, manages, controls and eventually gives to others (the beneficiaries) the property of the person who created the trust (the ‘trustor’). The trustor is able to act as the trustee as long as they are alive.

Why Called Living Trust

Since a living trust is created while you are still alive, it is called a ‘living trust’. Trusts are sometimes thought to be only for the wealthy. Not true.

A Living Trust Avoids Probate

A trust is for anyone who would like to avoid the costs associated with probate, avoid paying some death taxes, and provide some limitations on their young children’s ability to access monies left to them.

Funding the Trust

One way to describe a trust is to compare it to a storage facility where you put your property for safekeeping. You can put more property into the storage facility and you can also take property out of the storage facility as you please. An important part of creating a trust is to make sure that you and your attorney put all of your property into your trust, which is a process referred to as ‘funding the trust’.

You Have Control

A living trust is effective as of the date it is executed (signed & notarized) and, therefore, a living trust operates during your life and after your death. A living trust allows you to manage and control your property while you are living. Therefore, you do not lose the ability to use, control, or benefit from your property after it has been put into the trust. Also, a living trust provides for the property placed in the trust to pass to the beneficiaries you have named after your death without any probate proceedings.

A trust allows you to control when a person or persons receive the property. For instance, in the case you do not want a young person to receive all of their inheritance in one lump sum, you may state when they will receive it. You can even disburse the inheritance in stages, thus allowing for the person to mature before receiving their property.

Difference Between Trustee and Trustor

A ‘trustee’ is the one who owns, manages, maintains, controls and eventually gives to others (beneficiaries) the property of the person who created the trust (trustor), upon the trustor’s demise.

The trustor is able to act as the trustee as long as they are alive.

The administrator or executor or successor trustee (I’ll refer to these simply as ‘administrator’) is the person designated in the trust who will be responsible for handling the assets in the estate of the deceased person. Because this is a complicated process, usually an administrator retains an attorney to assist and ensure it is handled properly.

Common Misconception

One common misconception is that an administrator has the say in who receives the property. An administrator is not “the boss”. Their job is to administer the estate as directed in the will or trust document.

Administrator’s Responsibilities

Being an administrator is an important job because it requires diligence in finding out what are the deceased person’s assets and liabilities. One important responsibility of an administrator is notifying the following of the death:

• Creditors
• The social security administration (if the deceased was receiving those benefits)
• Retirement plans
• Tax authorities

Also, an administrator would have authority to find out all assets and make proper distribution, as outlined in the living trust. Therefore, careful thought should be given to the person or persons named as administrator.

Children as Administrators

Often we select our children, who, in most instances, are also beneficiaries, to be the administrator, but not always. It may depend on family dynamics whom you choose to be the administrator. Sometimes a neutral party may be a better selection. As your attorney, we can discuss this matter if you have questions or reservations about who will fill this vital role.

Compensation

An administrator may be compensated based upon a sliding scale of the gross value of the estate.

All of the property that is inside the trust avoids probate. A trust can provide significant estate tax savings and, in some cases, totally eliminate estate taxes. Trusts allow for professional management of your investments during your lifetime. Trusts are established and drafted based on the needs and goals of each client.

A living trust is a binding legal agreement in which a person call a trustee owns, maintains, manages, controls and eventually gives to others (the beneficiaries) the property of the person who created the trust (the trustor). The trustor is able to act as the trustee as long as they are alive.

Blended Families

A trust can protect your assets if you are unable to manage them yourself for some reason and can also be used to collect assets for your beneficiaries upon your demise. That can be especially important for blended families, that is families that have children from previous marriages, and each spouse would like to preserve their assets that they bring into a new marriage for their children from a previous marriage.

Wills

A will allows you to select who gets your property upon your death. If the gross value of your probate estate exceeds $150,000.00, a probate will be required to transfer your property to your loved ones.

Healthcare directives (HCD) are included in an estate plan.

With an HCD

A properly executed HCD allows a trusted decision maker to spare those who are unconscious (or otherwise unable to make decisions for themselves) from enduring unwanted healthcare treatments. In order for you to direct these difficult healthcare decisions, an HCD must be in place. It is not something that you can do at the last minute.

Without an HCD

Without an HCD prepared in advance of serious illness or accident or in the event that you are unable to make medical decisions for yourself, a court process known as a “conservatorship” would be required to make critical healthcare decisions that often need to be made quickly.

Heart-Wrenching Decisions

Often, sudden trauma or serious illness brings family members together for the first time in years. Heart-wrenching decisions now have to be made.

In some families, there may be a natural decision maker. In others, too many options, too many conflicting values, too much friction, and too little practice in making joint decisions create fierce disagreements that may hurt both the family and the patient.

You Decide

Without this document, family members may only be able to guess what you would have chosen for yourself in the following areas (to name just a few):

• Does dad/mom want to be on life support?
• Does dad/mom want to be resuscitated?
• Does dad/mom want his/her organs donated?
• Does dad/mom want to be cremated or buried?

In the event that there is disagreement over treatment, a physician will typically opt to continue life support. Thus, preplanning is critical.

Ask Yourself

One should ask himself/herself:

• Do I trust my family members to make good healthcare decisions on my behalf?
• Does my family know the quality of life with which I am willing to live with?

End-of-Life Reality

Most people envision a peaceful death at home, surrounded by loved ones. But the reality is that 80% of us will die in a long-term care facility or a hospital. In these settings, many modern healthcare treatment options are readily available to prolong a life. Unfortunately, when a patient can no longer weigh these options themselves, difficult healthcare decisions fall to distraught family members. A healthcare directive avoids this conflict. It is a legally binding document that states what end-of-life treatment you want.

These documents also allow you to direct physicians to withhold or withdraw life-sustaining procedures in future circumstances. This is what sometimes is referred to as a “living will”.