Living Trusts and Estate Planning

Probate is a court process whereby a deceased person’s assets are inventoried, the person’s creditors are located, assets are potentially sold and distributed to those creditors after the lawyers have taken their share of your property, and, if anything is left, the remaining assets are distributed to the person’s heirs in an order required by law. Probate is an expensive process and generally takes one to two years to complete. Fortunately, the entire probate process can be avoided with a properly prepared living trust.

 

A living trust is an intangible entity. Although you can’t touch it or see it, it does exist. Think of a trust as an empty box. You place your property in the box along with instructions regarding who should get the property in the box when you pass away. You close the box, lock it, and keep the key. It’s your box and you are in charge for as long as you have the legal capacity to make decisions. If something happens to you, the key is passed to a person you select and that person takes care of your box for you until you either regain capacity or pass away. When you do pass away, the box is opened and your instructions followed, all while avoiding the unnecessary expense and delay of probate.

 

It is important to realize that a trust, but itself, is not an estate plan. A trust is merely one component of an estate plan. An estate plan includes power of attorney documents for finances and for health care that take effect if you are unable to make decisions for yourself. Together, these documents allow you to plan for your future and to provide instructions to your family.

 

Estate planning documents include the following:

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Living Trust – A living trust is the foundation of any estate plan and avoids the unnecessary expense and delay of probate by allowing you to specify the persons who will receive your property upon your death.

 

Certificate of Trust – a certificate of trust is a kind of shorthand version of your trust document. Financial institutions often request a copy of your trust document if you wish to refinance your home, include a bank account in your trust, or otherwise act as the person in charge of your trust. A certificate of trust shows these institutions that you have the power to act, but without revealing the extent of your property and the identities of your beneficiaries.

 

Grant Deed – If you own your home, a grant deed is necessary to transfer your home to your trust. Without the grant deed, your home would not pass through your trust and probate would be required. Unlike many other estate planning practitioners, I not only prepare the grant deed, I also file it with the county recorder’s office.

 

Preliminary Change of Ownership Report – Generally speaking, when real estate is transferred the value of the property is reassessed for property tax purposes. Although placing your property in trust is a transfer, California law prohibits the tax assessor from reassessing your property if you are in charge of your trust. A document called a preliminary change of ownership report notifies the tax assessor not to reassess your property.

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Pour-over Will – A pour-over will directs that property you buy or inherit shortly before you die and don’t get around to transferring to your trust goes to (is “poured over” into) your trust and is distributed according to the instructions in your trust.

 

Durable Power of Attorney for Finances – A durable power of attorney for finances allows you to name a person you trust (called your attorney-in-fact for finances) to handle your finances if you cannot. If you become unable to manage your finances and you have not prepared a durable power of attorney, your family will have to ask a court for the authority to handle your financial affairs for you. The vast majority of powers of attorney take effect as soon as they are signed. However, the power of attorney for finances that I prepare only takes effect if you cannot manage your own affairs. If you do regain capacity, the power automatically extinguishes.

 

Power of Attorney for Health Care – A power of attorney for health care, sometimes referred to as an “advance health care directive” or “living will,” enables you to decide in advance about life support, organ and tissue donation, cremation or burial, and other health care matters and to choose someone to carry out your wishes, all without requiring court involvement.

 

Guardianship Nomination for Minor Children – For those clients who have children under the age of 18, a guardianship nomination is perhaps the most important estate planning document. If one parent dies, the other parent usually automatically has the right to custody of the children. However, if both parents should die, say, in a car accident, the law requires a minor child to have a personal guardian to step in and in effect become the child’s parent. As the child’s parents, you have the right to nominate a personal guardian for your children. The nomination must be approved by a court, but judges give great weight to a person selected by the parents. Whereas a personal guardian cares for the child, a property guardian can also be selected to manage property left to the kids.

 

Free Notarization – Unlike many other estate planners that may charge close to an extra $250 for notary work, I personally notarize all of your estate planning documents for free.