California Estate Planning
Frequently Asked Questions
Q: DO I NEED A WILL?
A: Every adult with assets needs a will.
Q: WHAT IF I DON’T HAVE ONE WHEN I DIE?
A: Then if you are a resident of California, the state of California controls who gets your assets. You may not like what the legislature has in mind for your money.
Q: WHAT IS PROBATE?
A: Probate is the state court-based system by which people without a Living Trust must administer estates. In California, probate can take two years or more. The process includes filing a petition showing the assets and heirs, obtaining valuations using a probate referee, and getting court permission to sell real estate or securities. After providing an accounting of all funds received, the executor finally obtains a court order which is then used to transfer estate assets to heirs. The cost to probate a California estate is based on a statutory fee schedule. A typical estate will pay 4% to 8% of the total value of the estate in probate fees.
Q: DO I NEED A LIVING TRUST?
A: California is a high probate fee state. If you own a home in California, you probably would benefit from a Living Trust to avoid the probate fees alone. Other advantages include: privacy, speed of distribution, and possible federal estate tax benefits. However, each situation is different and should be evaluated carefully by a professional.
Q: MY CHILD IS 18. WHAT DOCUMENTS SHOULD YOUNG ADULTS HAVE?
A. Most young adults don’t need a Will or Trust – unless they have significant assets or own real estate. However, it is crucial to protect young adults legally in case of emergencies, such as a sudden medical event or car accident! Without specific written consent in advance, privacy laws lock parents out. You will not be able to speak with their doctor or get information about your young adult’s condition once they turn 18. The key legal documents name an agent to act for the young adult in both health care and financial situations. Laura has created an online service to handle this for California parents. Scholar Shield provides custom, high-quality, attorney-drafted documents without the exorbitant attorney fees. Even better, you can get started in just 15 minutes so you don’t have to wait weeks for an appointment with your estate planning attorney! Visit the website here.
Q: HOW SHOULD I HANDLE MY DIGITAL ASSETS, LIKE MY WEBSITE, CRYPTOCURRENCY, ONLINE BANK ACCOUNTS, AND PHOTOS STORED IN THE CLOUD?
A. This is the estate planning challenge of the digital age. Without paper statements coming into your home, not only will your digital photos, website details, crypto, and cloud-based documents be lost to the world wide web, your loved ones may never know what financial accounts you have.
We recommend you either have financial statements mailed (instead of going paper-free) or designate time once a year to update your list of current accounts, including bank accounts, investment account, retirement accounts, insurance, employment benefits, annuities, etc. Keep that list with your estate planning emergency folder in an accessible spot in your home.
As for items that have no statements, you need to think through each one and create your own documentation. Who should receive your password and login details so your family photos can be saved? You don’t really need to share passwords for bank accounts, because with proper documents, your Trustee/Executor will have authority to access them in their own name.
Crypto is very tricky to bequeath, because whoever has the password can simply collect it for themselves without proving their authority to a particular financial institution. If you own cryptocurrency, you should plan to spend time researching your options and deciding on the best plan for your situation. It can get very complicated!
For everyone who uses a smartphone, we recommend using a good password manager app and adding your trusted contact to it. That person will get an email after a predetermined period if you stop using the app, and they will be invited to manage your passwords. You can also designate a trusted contact for Google and iCloud accounts. Check out this article for more resources.
Q: I AM IN A RUSH. HOW CAN I PROTECT MY ASSETS TEMPORARILY UNTIL I GET AN ATTORNEY-DRAFTED ESTATE PLAN?
A: Having a Will does not avoid Probate Court like a Living Trust, but does give you more control than no Will at all. The best way to prepare your own temporary Will without an attorney is to take advantage of the rules in California for handwritten Wills, also known as “Holographic Wills.” In order to be valid, there are a few important rules:
5. Do NOT have it notarized or witnessed. Send a copy to the named Executor. Keep the original in a fireproof location, and a copy accessible in your home with a note as to where the original is located so your Executor can find it if needed.
Q: IF I BECOME DISABLED OR MENTALLY INCAPACITATED, WILL A POWER OF ATTORNEY PROTECT MY ASSETS?
A: The short answer is: Sometimes, yes. But that protection depends on the language in your Power of Attorney, the financial institution’s acceptance of the document, and the types of assets you own. What if your document names only one agent but that person becomes ill or unavailable? Also, some banks will not accept documents which are too old or with unfamiliar provisions because they don’t want to accept liability if your agent fails to carry out the terms. The only way for your loved one or agent to gain control of the assets in that situation is to obtain a court-ordered conservatorship. Powers of Attorney, unlike a Living Trust, terminate upon your death, so assets are typically frozen upon death until the probate court names your executor.
In California, using a Living Trust can be a better option than sole reliance on a Power of Attorney. If you hold your assets in your Trust, the Trust language gives instructions for handling your assets upon your incapacity as well as after your death and no court intervention is necessary. A valid Power of Attorney is still useful for managing assets outside of Trust, such as IRA accounts and annuities. I recommend that clients review and update their Power of Attorney documents every five years.
Q: WHAT ABOUT THE ESTATE TAX?
A: For a summary of the estate tax, click here.
Q: DO I NEED A BYPASS TRUST?
A: Many Living Trusts drafted for married couples in the last two decades have a forced Bypass Trust, also known as A-B Trust structure, in order to save on estate taxes. However, the estate tax law has changed so that most people will never owe estate tax upon death, but their documents still require the surviving spouse to fund and manage a separate trust for the deceased spouse’s assets anyway. While there may be good non-tax reasons for using a deceased spouse’s trust, for many couples, the Bypass Trust is a paperwork hassle best avoided. If your Living Trust has a forced Bypass Trust provision, I recommend an immediate review by a legal professional.
Q: WHAT IS A LIVING WILL? WHAT IS AN ADVANCE DIRECTIVE?
A: A Living Will, once also known as a Durable Power of Attorney for Health Care, is now known in California as an Advance Health Care Directive. This document sets out your wishes for medical treatment in case you are too ill or hurt to communicate with your doctor. It can be difficult to convince a hospital to let a dying patient go with dignity without an Advance Directive — while the medical bills can escalate and wipe out remaining assets.
Q: WHAT ABOUT HEALTH CARE DECISIONS?
A: Every adult should have an Advance Health Care Directive, and it should name a trusted person as your Agent to work with your medical providers if you are unable to do so. The Agent may have temporary authority – such as if you are in a car accident and unconscious, or post-surgery on pain medications. The Agent’s authority may become permanent if your condition does not improve. Your Advance Health Care Directive should specifically authorize your Agent to access your medical records if a second (or third) medical opinion is needed – this provision is called a HIPAA waiver. Many form Advance Directives are missing this crucial provision! In drafting your document, you may prefer to give your Agent broad discretion about how to manage your health care, or you may prefer to be very specific about the care you want, especially at end of life. For example, you may direct that if you have a diagnosis of dementia and can no longer make your own decisions, if no improvement is expected, you would want no life support or treatments, but comfort care only. This would mean that if you had a heart attack, they would not perform CPR, and if you got pneumonia, they would not provide antibiotics. You may be as specific as you like in your Advance Health Care Directive. Be sure to give copies of your document to your Agent(s) and your doctor(s) and discuss your specific wishes directly with them.
Q: WHAT IS A “POLST”? WHAT IS A “DNR”?
A: These are specific documents signed by your physician that direct medical providers in your treatment in case of emergency. “POLST” means Physician Order for Life-Sustaining Treatment. “DNR” means Do Not Attempt Resuscitation. If you do not want CPR or other life-support measures in case of emergency, ask your doctor to provide you with one of these documents. You should provide a way for emergency personnel to know about your wishes by using a MedicAlert bracelet or medallion which states, “Do Not Resuscitate -EMS”. Be aware that your Agent will not necessarily be contacted automatically in case of emergency – that is why it is important that you give your medical provider a copy of your Advance Health Care Directive showing your Agent’s contact information.
Q: HOW SHOULD I CHOOSE MY TRUSTEE OR EXECUTOR?
A: During your lifetime, you will be the trustee (manager) of your own living trust. The question is how to choose someone to be the next trustee after you are gone. This person will also serve as the executor of your will, if your estate needs probate.
The first rule of thumb is this: Don’t nominate two or more family members to work together after your death (co-trustees). The risk of conflicts, family disharmony, wasting assets, and involving the Court to resolve disputes is many times higher when multiple people must sign every document and agree on every small step of the administration. There are so many decisions that can put a stop to the process of settling your estate, such as when to sell your securities, what CPA to hire, whether to fix up your home for sale, or which real estate agent to use to sell your home. When there is no agreement, the task does not get done until someone forces the issue by going to court, costing everyone time and money. There may be a lingering power struggle between family members that plays out during the trust administration, resulting in siblings who no longer speak to each other after your death. That said, the trustee must follow the language of your trust, be prudent and reasonable with your finances, and must answer to your beneficiaries when making decisions. So naming only one person at a time is always best.
The second rule of thumb is this: Use a professional trustee. It may be surprising, but putting your adult child in charge of your trust will usually end up costing them more in both money and time than using a professional trustee. The reason is that the professional trustee will not need to take time away from work and family to deal with the administration. The tasks include collecting all your accounts into one, paying final bills, clearing your home, getting appraisals, dealing with your retirement accounts, handling your insurance claims, selling your residence, filing tax returns, and preparing a formal accounting of all their work for the other beneficiaries.
A professional trustee does these tasks on a daily basis as part of his or her job, and can do them much more efficiently than a family member who is unfamiliar with trust administration. A professional won’t have a conflict of interest with any of the family members, and they won’t have to deal with a period of mourning before getting busy with the administration. Also, while professionals are entitled to the exact same compensation as a family trustee, the family trustee will generally hire an attorney to guide the administration process, prepare the many documents required, communicate with upset beneficiaries, assist with the formal accounting, and minimize liability. So the advantages of a professional trustee are many: lower or no attorney fees, no conflicts of interest, less chance of litigation, more efficient management, and quicker ultimate distribution of the assets. Most family beneficiaries are immensely relieved to learn they will not have the burden of being a trustee or executor.
How does one find a professional trustee? We can help you choose a licensed fiduciary or a corporate trustee in the East Bay area. The state of California has a licensing board called the Professional Fiduciaries Bureau, which enforces the statutory requirements that licensed fiduciaries must follow, including having proper insurance, continuing education, and reporting rules. Corporate trustees are generally banking or brokerage institutions and can be effective trustees after a death. If you want to plan for a time of disability, you will need a trustee willing to manage your money and pay your bills for you while you are still living but incapacitated. Most bank trustees will not serve as agents under a Power of Attorney, so the trend for the last several years has been in favor of individual licensed fiduciaries instead of corporate trustees.
Q: WHEN SHOULD I REVIEW MY EXISTING ESTATE PLAN?
A: You should review your estate plan every five years, whenever a major transition occurs in your family (such as a wedding, divorce, your minor child turns 18, or death of a family member), or when the estate tax law changes. For existing clients, we can assist you with a complimentary Trust Checkup by phone every five years. As part of our commitment to our clients, after each Trust Checkup we will provide an updated Durable Power of Attorney for no charge.
Q: CAN I CHANGE MY ESTATE PLAN WITHOUT SEEING AN ATTORNEY IN PERSON?
A: For existing clients, it is possible to update your entire estate plan without in-person contact! We can meet with you by video or phone to discuss your needs. We can send you draft documents and you can review them together by video or phone as well. Signing your documents can be done by a mobile notary at your home or office.
Q: IS THE FIRM TAKING ON NEW ESTATE PLANNING CLIENTS?
A: In order to provide excellent service to our existing clients and to properly assist families with probate and trust administration matters, the firm has no capacity to accept new estate planning clients.
Q: WHAT SHOULD I DO NEXT IF I NEED ESTATE PLANNING?
A: If you are NOT a current client with us, ask your friends, colleagues, and financial professionals for referrals to their estate planning attorneys. Or you can check with your local bar association for a referral to a competent estate planning attorney in your area.
Q: WHAT SHOULD I DO NEXT IF I NEED HELP AFTER THE DEATH OF A LOVED ONE?
A: Let’s schedule a complimentary discovery meeting to determine if we can assist you. To get started or for more information on the California process for administering a Trust or probate estate, see this page.
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PLANNING YOUR LEGACY PC 