Most people think they don’t need an estate plan unless they have a very large estate.  The truth is, the State has an estate plan for you in the form of intestacy laws. You, however, may not like the plan created by the state for you. Click here for more information on intestacy.

For most people, a simple Will is adequate for their needs and it is recommended that everyone have a Will. California has a simple Will that can be used by filling in blanks on a form.

You are never too young to begin the process.  While you may wish to update your documents as you advance in age, it is always easy to make changes.  It is too late to start, however, after an unexpected death and we have seen too many situations where this has happened, leaving loved ones to deal with a real mess.

For Californians, a living or revocable trust should be considered whenever there is real property or where the value of the estate is greater than $100,000 in order to avoid a court probate.    However, by avoiding the probate process there is a risk that one’s wishes will not be followed, that all creditors will not be taken care of, and that mistakes will be made.  Therefore, the use of a revocable trust requires that you have a person who you can trust and who is capable of handling the responsibilities of winding up your estate.

The biggest problem with a revocable trust is that you may fail to “fund” it. That means the asset is not transferred to the trust. Any asset not transferred is still in your estate and may require a probate.  As part of our services we have our clients list their assets and prepare transfer documents for each asset the client wishes to transfer to the trust. However, the use of a revocable trust does not prevent your creditors from access to your assets for collecting on a debt.  Under California law, the creditor can treat assets held in your trust as your property and these assets are not protected.

In addition to a revocable trust, we recommend you also have a Will. In case you have an asset not transferred to your revocable trust, the Will can make the transfer to the trust so that all your estate is disposed of as you planned.  There also may be a need to nominate a guardian for minor children, and other reasons for using a Will with a trust.

Other instruments that are frequently used include a health care directive and a power of attorney for financial matters.

There is a combined gift and estate tax on the assets in your estate. For purposes of these taxes, your estate includes the payoff of any life insurance owned by you.  The tax applies to any gifts made during your life or upon your death. The rates of tax are very high, but there are important exemptions.  You can give up to $13,000 per person per year to as many people as you wish.  Gifts to tax exempt organizations are tax free.  Any amount can be given to a spouse tax free.  In addition, each person has an exemption for the year in which the person dies.

The cost of a complete estate plan varies widely.  Attorney-drafted documents are recommended.  There is no “one plan fits all” when it comes to estate planning and you deserve to have your particular needs analyzed by an experienced drafter. 

Our estate planning packages start at $1,800.00 for an individual with a trust, will, health care directive and power of attorney for finances. There will usually also be costs associated with transferring your assets to your trust. Also, there are additional costs if the client would like the documents translated into Japanese.

More importantly, the cost of NOT planning your estate can be much higher (see Probate section).

If you do nothing (i.e. no will, no revocable trust), your estate will be governed by the rules called “intestacy.”  Basically, your estate will be determined by the rules set forth by the state. Usually this will mean greater costs and difficulty for your heirs. Remember, your assets are still subject to your debts and obligations.

If you did not create a trust or a will, your assets will have to be probated under the state intestacy laws in order that they can be passed on to your heirs. If you have created a revocable trust, the person you named as successor trustee will have the duties to distribute your assets. If you did not use a trust but have a will, your executor will carry out these tasks in probate.  Bills must be paid, income taxes paid and more. The process will be much faster, cheaper and more private if you use a trust, however.

The main ground for challenging a will or trust is that the maker lacked the capacity to understand what he or she was doing when signing the document, or that someone exerted undue influence over the maker.  Most wills and trusts contain no contest clauses which are intended to deter this or any other challenge. In either case, the process starts with a Petition filed in the Probate Court.  We strongly urge that you consult with an attorney in this regard.