1. WHAT IS ESTATE PLANNING?
Estate planning is a procedure. It includes individuals -your family, other individuals and in many cases charitable organizations of your option. It also includes your possessions and all the different forms of ownership and title that those possessions might take.
As you plan your estate, you will consider:
* How your assets will be handled for your benefit if you are unable to do so
* When certain properties will be transferred to others, either during your lifetime, at your death, or at some point after your death
* To whom those properties will pass
Estate planning also addresses your welfare and needs, planning for your own personal care and healthcare if you are no longer able to look after yourself. Like many people, you may at first think that estate planning is merely the writing of a will. But it incorporates much more. As you will see, estate planning may include monetary, tax, medical and company planning. A will is one part of that planning process, however other documents are required to fully address your estate planning needs. The purpose of this material is to summarize the estate planning procedure and how it can address and meet your goals and objectives.
As you consider it further, you will recognize that estate planning is a vibrant procedure. Simply as individuals, possessions and laws change, it may well be necessary to adjust your estate plan every so often to reflect those modifications.
2. WHAT IS INVOLVED IN ESTATE PLANNING?
In beginning to consider your estate plan, I ask my customers to complete a quick questionnaire to respond to the first of the following questions and during our preliminary meeting we talk about the other questions:
* What are my properties and what is their approximate worth?
* Whom do I wish to get those properties -and when?
* Who should handle those assets if I can not, either during my lifetime or after my death?
* Who should have the obligation for the care of my minor children, if any, if I become incapacitated or pass away?
* If I can not look after myself, who should make decisions on my behalf concerning my care and welfare?
3. WHO NEEDS ESTATE PLANNING?
Whatever the size of your estate, you must designate the person who, in the event of your inability, will have the duty for the management of your properties and your care, consisting of the authority to make healthcare choices in your place. How that is achieved is discussed listed below in this product. If your estate is small in worth, you might focus merely upon who is to get your assets after your death and who must be in charge of its management and circulation.
If your estate is bigger, we will talk about with you not just who is to receive your possessions and when, but also numerous methods to preserve your properties for your recipients and to lower or hold off the quantity of estate tax which otherwise may be payable on your death.
If one does no planning, then California law offers the court consultation of persons to take duty for your personal care and possessions. California likewise provides for the circulation of properties in your name to your heirs pursuant to a set of guidelines to be followed if you pass away without a will; this is known as "intestate succession." If you pass away without a will and if you have any loved ones (whether through your own family or that of your spouse), no matter how remote, they will be your beneficiaries. However, they may not be individuals you would wish to acquire from you; for that reason, a living trust or a will is the more suitable approach.
4. WHAT IS INCLUDED IN MY ESTATE?
Your estate includes all property or interests in home which you own. The simplest examples are those properties which remain in your name alone, such as a checking account, property, stocks and bonds, furniture, home furnishings and precious jewelry.
You might likewise hold home in lots of kinds of title other than in your name alone. Joint tenancy is a common kind of ownership which takes properties far from control by will or living trust. Beneficiary classifications on securities accounts and savings account are options which must be carefully thought about too.
Lastly, properties which have recipient classifications, such as life insurance, IRAs, certified retirements plans and some annuities are really vital parts of your estate which require careful coordination with your other assets in developing your estate strategy.
The value of your estate is equal to the "reasonable market value" of each possession that you own, minus your financial obligations, consisting of a home loan on your house or a loan on your cars and truck.
The worth of your estate is necessary in identifying whether, and to what degree, your estate will be subject to estate taxes upon your death. Planning for the resources needed to fulfill that commitment at your death is another fundamental part of the estate planning process.
5. WHAT IS A WILL?
A will is a conventional legal document which works only at your death to:
* Name individuals (or charitable organizations) to receive your assets upon your death (either by straight-out present or in trust).
* Nominate an administrator, selected and monitored by the court of probate, to handle your estate, pay debts and expenses, pay taxes, and distribute your estate in an accountable way and in accordance with your will.
* Nominate the guardians of the individual and estate of your small children, to care and provide for your small children.
Properties or interests in home in your name alone at your death will undergo your will and subject to the administration of the probate court, generally in the county where you reside at your death.
6. WHAT IS A REVOCABLE LIVING TRUST?
A revocable living trust is likewise typically referred to as a revocable inter vivos trust, a grantor trust or, simply, a living trust. A living trust might be changed or revoked by the individual producing it (typically called "trustor," "grantor," or "settlor") at any time during the trustor's lifetime, as long as the trustor is qualified.
A trust is a written agreement in between the private producing the trust and the person or organization called to manage the possessions held in the trust (the "trustee"). In many cases, it is suitable for you to be the preliminary trustee of your living trust, till management support is anticipated or needed, at which point your trust must designate a private, bank or trust business to act in your place.
The regards to the trust ended up being irrevocable upon the trustor's death. Due to the fact that the trust includes arrangements which offer the circulation of your properties on and after your death, the trust acts as a replacement for your will, and eliminates the requirement for the probate of your will with respect to those properties which were kept in your living trust at your death.
You must execute a will even if you have a living trust. That will is usually a "put over" will which attends to the transfer of any possessions kept in your name at your death to the trustee of your living trust, so that those assets might be distributed in accordance with your desires as set forth in your living trust.
7. WHAT IS PROBATE?
Probate is the court-supervised process established under California law which has as its objective the transfer of your possessions at your death to the recipients stated in your will, and in the way prescribed by your will. It also provides for the fairly quick determination of valid claims of any lenders who have claims versus your possessions at your death.
At the start of probate administration, a petition is submitted with the court, generally by the person or institution called in your will as executor. After notification is given, and a hearing is held, your will is admitted to probate and an administrator is selected. If you die "intestate" (that is, without a will), your estate is still subject to probate court administration and the person selected by the court to manage your estate is referred to as the "administrator.".
If the possessions in your name alone at your death do not include an interest in real estate and have an overall worth of less than $100,000, then typically the beneficiaries under your will might follow a statutory procedure to effect the transfer of those assets pursuant to your will, based on your financial obligations and costs, without a formal court-supervised probate administration.
A probate has benefits and downsides. The court of probate is accustomed to dealing with disputes about the circulation of your possessions in a relatively expeditious style and in accordance with defined rules. In addition, you are ensured that the actions and accountings of your executor will be reviewed and authorized by the probate court.
Downsides of a probate include its public nature; your estate plan and the worth of your possessions ends up being a public record. Also, because lawyer's costs and executor's commissions are based upon a statutory cost schedule computed upon the gross (not the web) value of the properties being probated, the costs might be greater than the expenditures sustained by a similar estate handled and distributed under a living trust. Time can likewise be an aspect; often distributions can be made pursuant to a living trust quicker than in a probate proceeding.
8. TO WHOM SHOULD I LEAVE MY ASSETS?
As soon as you have actually determined who ought to get your assets at your death, I can help you clarify and appropriately determine your recipients. For example, it is crucial to clearly identify by correct name any charitable organizations you want to offer; numerous have comparable names and in some households, people have comparable or even similar names.
It is likewise important for you to consider alternative distribution of your assets in the event that your primary recipient does not survive you.
When it comes to recipients who by reason of age or other imperfection may not have the ability to deal with assets dispersed to them outright, trusts for their advantage might be produced under your will or living trust.
9. WHOM SHOULD I AS MY EXECUTOR OR TRUSTEE?
After your death, the executor of your will and the trustee of your living trust serve practically identical functions. Both are responsible for making sure that your wishes, as set forth in your will or living trust, are carried out. Although your executor is generally subject to direct court guidance, both the executor and the trustee have comparable fiduciary duties. The trustee of your living trust might assume responsibilities under that file while you are living.
While you might serve as the preliminary trustee of your living trust, if you end up being incapable of functioning as a trustee, the designated successor trustee will then step in to handle your assets for your advantage. An executor or trustee may be a spouse, adult kids, other loved ones, household friends, business associates or a professional fiduciary such as a bank.
I discuss this matter will my customers. There are a variety of problems to consider. For instance, will the visit of among your adult kids cause unnecessary tension in his or her relations with siblings? What conflicts of interest are developed if a business associate or partner is called as your executor or trustee? Will the person named as executor or follower trustee have the time, organizational capability and experience to do the job successfully?
10. HOW SHOULD I PROVIDE FOR MY MINOR CHILDREN?
A minor child is a child under 18 years of age. If both moms and dads are deceased, a small kid is not lawfully qualified under California law to take care of himself or herself. In your will, for that reason, you must nominate a guardian of the individual of your minor kids to monitor that child and be accountable for his or her care till the kid is 18 years of ages.
Such a nomination can avoid a "yank of war" in between well-meaning relative and others if a guardian is required.
A small is likewise not legally qualified to manage his or her own property. Properties moved outright to a small should be held for the small's benefit by a guardian of the kid's estate, till the kid achieves 18 years of age. You must choose such a guardian in your will as well. In providing for small children in your estate plan, you ought to consider the use of a trust for the kid's benefit, to be held, administered and distributed for the child's advantage up until the child is at least 18 years old or some other age as you might decide. You might likewise consider a custodian account under the California Uniform Transfers to Minors Act as an option in making specific gifts to minors.
11. WHEN DOES ESTATE PLANNING INVOLVE TAX PLANNING?
Estate taxes are enforced upon an estate which has a net value, in 2002, of $1,000,000 or more. Under existing law, that amount will increase, in irregular increments, to $3,500,000 in 2009. Estate taxes are scheduled to be reversed for 2010. In 2011, estate taxation will go back to the law which existed before the enactment of the 2001 tax law modifications, so that an estate which has a net value of $1,000,000 or more will undergo estate taxes. (See Estate Planning Under the 2001 Tax Relief Act: What To Know And What To Do). For estates which approach or go beyond the exemption quantity, substantial estate taxes can be conserved by proper estate planning, usually before death and, in the case of couples, prior to the death of the very first spouse. Estate preparing for taxation purposes should consider not only estate taxes, however likewise earnings, gift, residential or commercial property and generation-skipping taxes also. Qualified legal suggestions about taxes should be obtained throughout the estate planning pr!ocess.
12. HOW DOES THE WAY IN WHICH I HOLD TITLE MAKE A DIFFERENCE?
The The Law Firm Of Steven F. Bliss nature of your properties and how you hold title to those properties is a vital consider the estate planning process. Prior to you change title to a property, you should understand the tax and other repercussions of any proposed modification. I will have the ability to encourage you about such matters.
Neighborhood property and separate property.
If you are married, assets earned by either you or your spouse while married and while a local of California are community residential or commercial property. On the other hand, a married individual may own separate property as an outcome of properties owned prior to marital relationship or gotten by present or inheritance during marriage. There are substantial tax factors to consider which require to be attended to in the estate planning process with respect to both community property and different residential or commercial property. There are also considerable property interests to consider.
Different home can be "transmuted" (that is, altered) to community property by a composed contract signed by both spouses and drafted in conformity with California law.
It is necessary to look for qualified legal suggestions when identifying what character your residential or commercial property is and how the property should be entitled.
Joint Tenancy Property.
Despite its source, if a property is kept in joint tenancy, it will pass to the enduring joint renter by operation of law upon the death of the first joint occupant. On the other hand, residential or commercial property held as neighborhood residential or commercial property or as tenants in typical, will go through the will of a departed owner.
13. WHAT ARE OTHER METHODS OF LEAVING PROPERTY?
A number of properties are transferred at death by recipient designation, such as:.
* Life insurance coverage earnings.
* Qualified or non-qualified retirement strategies, including 401( k) plans and IRAs.
* Certain "trustee" savings account.
* "Transfer on death" (or "TOD") securities accounts.
* "Pay on death" (or "POD") possessions, a typical title on U.S. Savings bonds.
These beneficiary classifications must be thoroughly collaborated with your general estate strategy. Your will does not govern the distribution of these possessions.
14. WHAT IF I BECOME UNABLE TO CARE FOR MYSELF?
If you do not make any plans in advance, a court-supervised conservatorship case might be required if you become incapacitated.
Conservatorships are procedures which allow the court to designate the individual accountable for your care and for the management of your estate if you are unable to do so yourself.
You should, therefore, pick the person or persons you want to look after you and your estate in the event that you become incapable of handling your properties or providing for your own care.
With respect to the management of your possessions, the trustee of your living trust will supply the necessary management of those assets held in trust. Nevertheless, to deal with possessions which might not have actually been transferred to your living trust prior to your incapacity or which you may receive after inability, a durable power of attorney for property management must be thought about. In such a power, you select another person (the "attorney-in-fact") to make property management decisions in your place. The attorney-in-fact handles your assets and functions much as a conservator of your estate would function, but without court supervision. The authority of the attorney-in-fact to manage your assets ceases at your death.
A durable power of attorney for health care allows your attorney-in-fact to make health care decisions for you when you can no longer make them yourself. It may likewise consist of declarations of dreams worrying such matters as life sustaining treatment and other healthcare problems and directions concerning organ donation, disposition of remains and your funeral.
15. WHO SHOULD HELP ME WITH MY ESTATE PLANNING DOCUMENTS?
Can I Do It Myself?
Wills and trusts are legal files which need to be prepared just by a qualified lawyer. You ought to be wary of organizations or workplaces who are staffed by non-lawyer workers and who promote "one size fits all" living trusts or living trust sets. An estate plan created by somebody who is not a certified lawyer can have huge and expensive consequences for your estate and may not attain your objectives and objectives. Nevertheless, lots of other experts and company representatives might end up being involved in the estate planning process. For instance, accredited public accountants, life insurance coverage sales representatives, bank trust officers, financial planners, workers managers and pension experts frequently participate in the state planing procedure. Within their areas of knowledge, these professionals can help in planning your estate.
16. WHAT ARE COSTS INVOLVED IN ESTATE PLANNING?
The costs of estate planning depend upon your private circumstances and the intricacy of paperwork and planning needed to accomplish your goals and goals. The costs normally will include my charges for putting your financial details into my electronic estate planning program which allows me to graphically show you the results of alternate plans, discussing your estate strategy with you and for preparing your will, trust agreement or other legal files which you may require.