Does Your Family Need an Estate Plan?
When you’re young and healthy, death is not something most people think about. In fact, many avoid thinking about it at all. That’s one of the reasons why estate planning doesn’t even cross their minds. Or if it does, they think they have plenty of time and will get to it when they’re older, when they have a family, when they’re ready.
Unfortunately, death doesn’t wait until you’re ready and anyone can die at any moment. So the answer to the question about whether your family needs an estate plan is always yes. Because of estate taxes and the cost of probate, trust us when we say the cost of an estate planning attorney is worth it in the long run.
Because we never know what our future holds, the responsible thing to do is to consult with a lawyer about what estate planning you need depending on your age and personal circumstances. For some, this will mean no more than a living will for the moment, for others it will include everything from a last will and testament to living trusts and a Power of Attorney.
Here's everything you need to know.
Here’s an overview of what you need to know when planning an estate.
What is a Will?
Most people know that a Last Will & Testament is a legal document that lays out your wishes regarding the distribution of your assets and the care of any minor children after you die. There are certain criteria a Will must meet for it to be considered a binding legal document. In California, these requirements are that it must be in writing, signed (witnessed) by at least two witnesses, and signed by the testator (you).
California also recognizes what is known as a Holographic (Handwritten) Will. In this case, as long as the will is in your handwriting and you have signed it then it is considered valid, even if there are no witnesses.
A will only takes effect after you have died and in California is not officially recognized until the court has issued an order finding the will valid. This step is known as Probate and can take anywhere from 9 months to 2 years to complete. Estate planning attorneys aim to keep your costs as low as possible so they’ll often advise that you have a living trust instead.
How do you actually plan an estate?
Let's take a look.
Although every estate is unique, there are a few things you should always have.
What is a Living Trust?
Just like a will, a Living Trust allows you to distribute your assets (which include money and property) according to your personal wishes after you pass away. This is where the similarity ends though. First, a living trust cannot name a guardian for your minor children. Second, a living trust takes effect from the moment it is created.
This means that as soon as you transfer any assets into that trust, how they are managed will be determined by the terms of the trust. Living trusts are more complicated to create than a will, but unlike a will, they can usually operate without any court supervision. Because Probate isn’t a necessary step, a living trust is often the more cost-effective solution in estate planning.
Living trusts can be irrevocable but are usually revocable. This means that you can change the terms and conditions of the trust at any time. With a living trust, the settlor (person who creates the trust – you) is the initial trustee (person who manages the trust). You have full control of all your assets. When you pass away, a successor trustee will take over managing your trust according to your wishes.
To handle the distribution of any assets that aren’t already in the trust, guardianship for your minor children and things that cannot be determined by a living trust (such as funeral arrangements) after you pass away, a living trust includes what is known as a Pour-Over Will.
A living trust will also include a Living Will and/or Advance Medical Directive, and a Financial Power of Attorney if you become medically incapable of making your own decisions.
What is a Living Will?
A Living Will describes your wishes concerning your healthcare for your loved ones, your medical team, and legal authorities. Unlike a last will & testament, it takes effect if you are medically incapable of making your own decisions – so before you have passed away. Every person should have a living will regardless of wealth or family status, and every living trust should include one.
Most people create a living will because devastating accidents can happen and they want to be sure their loved ones know exactly what their wishes regarding their medical care are, and ensure that those wishes are followed even if their loved ones don’t agree with those decisions.
However, their purpose is usually to prevent loved ones from having to make tough decisions regarding life support, resuscitation and more in the event of a life-threatening emergency. A living will alone doesn’t give anyone else the authority to make health care decisions on your behalf though. If you want your Advance Health Care Directive to give someone permission to make medical decisions for you then your living will needs to be combined with a Power of Attorney for Healthcare.
We believe that every client is unique.
We understand how tough these types of decisions can be and we will guide your estate planning with empathy, respect, patience and a commitment to ensuring your every wish is protected by law.
Disclaimer: The information in this article is for general purposes only, and it is not intended as a substitute for legal advice.