Estate Plans - the Fundamental Questions

Because estate planning is not just about reducing taxes but also about making sure your assets are distributed as you wish both now and after you're gone, you need to consider these questions before you begin your estate planning.

Who Should Inherit Your Assets?

If you are married, before you can decide who should inherit your assets, you must consider marital rights. Under California Community Property law, each spouse has a one half interest in property acquired during marriage whereas each spouse may own 100% of their separate property defined as property owned before marriage, property acquired after marriage by gift or inheritance or the rents and profits of such property. Therefore, if you die without a will or living trust, state law will dictate how much passes to your spouse.

Once you've considered your spouse's rights, ask these questions:

  • Should your children share equally in your estate?
  • Do you wish to include grandchildren or others as beneficiaries?
  • Would you like to leave any assets to charity?
  • Which assets should they inherit?
  • When and how should they inherit the assets?
  • To determine when and how your beneficiaries should inherit your assets, focus on these factors:
  • The potential age and maturity of the beneficiaries,
  • The financial needs of you and your spouse during your lifetimes, and
  • The tax implications.

Why Should I Have a Durable Power of Attorney?A Power of Attorney appoints someone you know and trust to make your personal health care and financial decisions even when you cannot. If you are incapacitated without these legal documents, then you and your family will be involved in a judicial proceeding known as a guardianship and/or conservatorship. This is the court proceeding where a judge determines who should make these decisions for you under the ongoing supervision of the court

Will or Trust?If you wish to decide to whom, how and when your assets are distributed at death, you have two basic choices, a will or a trust. Please reference a simple side by side chart comparing the features of each. To learn more about Wills, please reference Probate Law because all Wills are subject to the judicial procedure known as probate. Please reference Living Trusts to learn more about Living Trusts.

Who Should Draw Up Your Will or Living Trust?A lawyer! Don't try to do it yourself. Estate law is much too complicated. You should seek competent legal advice before finalizing your estate plan. While you may want to use your financial advisor to formulate your estate plan, wills and trusts are legal documents. Only an attorney who specializes in estate matters should draft them. You would go to a doctor for advice concerning your health. You should go to a lawyer for advice concerning your wealth.

Who Should I Select as an Executor or Trustee?You also need to select someone to administer the disposition of your estate — if you have a living trust, a trustee, and an executor or personal representative under your Will. 1) An individual, such as a family member, a friend or a professional advisor, 2) an individual professional fiduciary, or 3) a corporate trustee which is an institution, such as a bank or trust company, can serve in these capacities. Many people name an individual, an individual professional trustee and an institution, as successor trustees and executors, to leverage their collective expertise.

What does the executor or personal representative do? He or she serves after your death and has several major responsibilities outlined under Fiduciary Law.

What are the advantages of each category of trustee and executor? An individual has the usual advantage of being familiar with the family and therefore knowing what the client would have intended, they typically are paid lower administrative fees, and they can always hire professional advisors if needed. An individual professional fiduciary is employed full time as either a trustee, executor, conservator etc., typically is paid more than an individual nonprofessional but less than a corporate trustee, and is useful for clients who do not have an individual they trust enough to be trustee but do not wish to pay the significant fee of a corporate trustee. A corporate trustee does not die, does not become disabled, if they are sued they are collectable, they are specialists in handling trust administrations, are independent, and, at the very least, are useful as a last successor trustee so that, if all other trustees die or resign, the beneficiaries do not have to petition the court to appoint a trustee.

Finally, make sure the executor, personal representative or trustee doesn't have a conflict of interest. For example, think twice about choosing an individual who owns part of your business, a second spouse or children from a prior marriage. A co-owner's personal goals regarding the business may differ from those of your family, and the desires of a stepparent and stepchildren may conflict.

Who Should I Select as a Guardian for my Children?
If you have minor children, perhaps the most important element of your estate plan doesn't involve your assets. Rather, it involves who will be your children's guardian. Of course, the well-being of your children is your priority, but there are some financial issues to consider:

  • Will the guardian be capable of managing your children's assets?
  • How will the guardian determine your children's living costs?
  • Will the guardian be financially strong? If not, your estate plan should include instructions to compensate the guardian for necessary expenses.
  • Will the guardian's home accommodate your children? If not, your estate plan should include instructions allowing the guardian funds necessary to assist the guardian in providing comfortable care and housing for your child.

How do I maintain control over my assets in an estate plan?
Please reference the Home page tab entitled Law Firm Procedures to the subtitle Transfer of Title and/or Beneficiary Designation of Assets to Plan.

Is it important to maintain or update my estate plan and, if so, how do I do that?
Please reference under Updating and Maintenance.

A cookie-cutter approach is not viable in estate planning. Please don't use a template form method, consult an experienced professional.

Law Offices Of Michael J. Wittick, A Professional Law Corporation is located in Irvine, CA and serves clients with estate and wealth preservation matters throughout Irvine, Lake Forest, Laguna Woods, Laguna Hills, Foothill Ranch, Tustin, Aliso Viejo and the surrounding areas.

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