Frequently Asked Questions

To give you a heads up and a head start on your estate plan, we’ve tried to answer the most common of the questions people have about the process. However, if you have a question that you don’t see here, please call us. We’re happy to help.

 

Estate Planning

What is an "estate"?
Simply put, estate is a legal term that refers to anything you own—the total of all of your possessions. The concept of estate should also include everything you manage or have responsibility for such as your minor children, dependents, pets, yourself, and even how you'll be remembered after you die.
What is an "estate plan"?

An estate plan is a written set of instructions for others to manage and take care of your estate if you become unable to for any reason. It's written to not only have legal weight, but to ensure that it will be carried out according to your wishes. The process of writing an estate plan allows you to map the future of your loved ones and avoid court intervention as much as possible. Generally, an estate plan is based on four major documents:

  1. Documentation (your will or trust) describing how you wish your assets to be managed and distributed
  2. Paperwork that determines the guardianship of your minor children
  3. Durable power of attorney to designated who can make financial and medical decisions on your behalf
  4. Your Advance Health Care Directive describing clearly your medical intervention wishes should in a variety of scenarios
What happens if I die without a written estate plan?
California has already decided who gets your assets if you die without an estate plan. It's called the intestate succession statutes. A court will choose the guardian of your minor children in order of priority determined by the California legislature. While these laws attempt to be fair, it's likely that the state will not carry out your wishes in the same fashion if you had an estate plan.
What are the main options for estate planning?
Essentially, you have three options when it comes to estate planning; you can do nothing, write a will, or establish a living trust. Each option has advantages and disadvantages depending on your life, extent of your assets, dependents, and so on.
What is the difference between a will and a living trust?
A living trust is a flexible, "living" legal entity that owns your assets for you. Since the living trust owns the assets for you, your fiduciaries can bypass going to court to manage your assets if you're incapacitated or you die. A will is not a legal entity and cannot own assets for you. Therefore, your fiduciaries must go to court in order to get the power to manage your assets for the long-term if you're alive, but unable to do it yourself; and must go to court to distribute your assets to your beneficiaries if you die.
What happens if I die without a written estate plan?
California has already decided who gets your assets if you die without an estate plan. It's called the intestate succession statutes. A court will choose the guardian of your minor children in order of priority determined by the California legislature. While these laws attempt to be fair, it's likely that the state will not carry out your wishes in the same fashion if you had an estate plan.
Should I have a will or living trust?
That depends on your personal situation. We'll be happy to sort through the factors to explain the pros and cons of wills and living trusts so that you can make a fully informed and educated choice. Some factors to consider are whether you own real estate, own a business, have minor children, are older and single, don't have family living nearby, own real estate in other states, and how much money you are willing to invest in creating your estate plan.
Who are my beneficiaries?
Beneficiaries are the people you distribute your assets to on your death. They're the ones who benefit from the estate.
Who are my fiduciaries?
Fiduciaries are people you appoint to act on your behalf to manage your estate if you become unable to for any reason. These fiduciaries are known by different names depending on the document that grants them authority to act. For example, if your fiduciary is acting on your behalf for your minor children, she's known as the Guardian. If she's acting on behalf of your living trust, she's your Successor Trustee. If you die with or without a will, she's known as your Personal Representative. Because of the nature of certain matters, you should choose a fiduciary you trust to take on the role you're appointing her to, but also someone with the necessary skills to carry out the job. It's common to appoint different fiduciaries depending on the job.
What if I have children from a previous marriage; is there a way I can distribute my assets to them while letting my spouse distribute his/her assets differently?
You have the right and several options to distribute assets to whomever you choose upon your death. An AB Trust is a living trust that allows you to create a double trust. Your spouse gets to live off of the assets or income in your half of the trust after you pass away. Then, your separate trusts distribute assets as you determined when you wrote the trust documents. There are other ways to achieve this goal as well that we can share with you.
What is "succession of heirs" and how does it work?
If a named beneficiary in your estate plan passes away before your estate is distributed, the state mandates that assets be passed along a bloodline or adoption line. However, unlike British Monarchy, you have options. You can establish a set of back-up beneficiaries if your primary beneficiaries die before they receive your estate.
What if I don't think the people I am leaving my estate to will be responsible with the money? Is there a way to save it from poor spending habits?
It's true, some people are not prepared to handle a lump sum of money. If you'd rather your favorite nephew go to college rather than buy a Ferrari, you can keep assets in trust for many years and have them managed by your successor trustee, or whomever else you choose. Many people who do this set up a deferred distribution plan where assets are doled to beneficiaries over time.
Should I tell my family what's in my estate plan?
Your estate plan is more than who gets your money when you die. Your estate plan is about making sure your assets are managed and your responsibilities are met if you are unable to do so. You should talk with your fiduciaries about managing your assets and you should speak with your proposed guardians about your wishes for the care of your children. Give them an opportunity to ask you as many questions as needed and to be certain you have their full commitment. You don't have to tell your children what they might be inheriting. That part is entirely up to you.
Can I leave gifts to charity and how will they affect my estate plan?
One thing to keep in mind when creating your estate plan is what kind of legacy you wish to leave—how you'll be remembered and what kind of gifts you wish to leave for the world. Charitable gifts can have a powerful effect on your beneficiaries who might not notice the difference between receiving 95% vs. 100% of your estate, but will remember that the importance of the charity you benefited. Charitable giving also reduces the size of the estate, hence reducing the amount of estate taxes that you may pay. Lastly, the charity obviously benefits from your generosity as well.
How do I keep people I don't want to inherit my estate from making a claim on it?
That's easy, disinherit them. If there are people who may legally make a claim on your estate and you want to protect your estate from them, you should make it explicit in writing.
What are "will substitutes"?
Will substitutes refer to a number of legal mechanisms that people use as estate planning tools. Generally, they are used as a method of transferring ownership outside the probate system not using a will or a living trust. Will substitutes include joint tenancy ownership, payable on death accounts, and beneficiary designations on checking accounts, IRAs, 401(k)s, and other qualified plans.
What is "joint tenancy"?
Joint tenancy is a term that means that you own some property (generally real estate) with another person. By law, if a joint tenant dies, the remaining joint tenants equally, and automatically, inherit the deceased tenant's ownership interest. If you and your spouse both own your home, you are most likely joint tenants, but since we're in California, you probably would own it as community property, which has roughly the same outcome of automatic inheritance. In estate planning, joint tenancy usually refers to cases where someone utilizes a will substitute by adding a beneficiary as a joint tenant to their home or bank account so they can transfer the asset to this person outside the probate court after their death. Using joint tenancies or any other will substitutes in your estate planning can have unintended consequences. You should speak with an attorney before doing so.
What is "separate property"?
In some states, when a couple gets married, their assets earned after marriage are not automatically commingled. This means that they retain separate ownership of their property unless they take legal action to share their assets with their spouse. It's important to account for all separate property as well as community property in your estate plan.
What is "community property"?
Community property is property owned by both you and your partner. In California, when a couple gets married or registers with the state as Domestic Partners, their assets earned after doing so are automatically commingled (unless you sign a pre-nuptial agreement). This means that they automatically own one another's property unless they take legal action to keep it separate. In most cases, community property will account for the bulk of you and your spouse or domestic partner's property.
How will my estate be settled and who will settle it?
Your estate will be settled by your personal representative, your successor trustee, or both. If you have a will, your personal representative will take the will through the probate court, who will oversee the entire process. If you have a trust, your successor trustee will settle the estate. If you have a will and a trust, both processes will take place.

Wills

What is a will?
A will is a legally binding document that addresses how your assets will be distributed at your death and also names a personal representative who will assist with the administration of your estate. Wills are settled in the probate court.
How difficult is it to change my will?
A will is a flexible document that can be changed at any time, as long as you are alive and competent. Usually, it's best to seek the help of an attorney to change a will.
Are personal representatives personally liable for debt owed by the estate?
No. Personal representatives are never responsible for debt, the estate is. The probate system protects executors from being treated improperly by creditors.
Can the personal representative take advantage of my will to his or her own ends?
It is possible, however, this rarely happens. Personal Representatives are watched carefully by the probate system. Self-dealing is rarely allowed unless your personal representative is also the beneficiary.
What is probate?
Probate is the state's way of winding up your affairs after you die when you have a will or no estate plan document. Your estate is processed through the probate court. Probate is a specific set of legal codes that allows the state, through your personal representative, to properly accomplish tasks like paying off debt, fielding fraudulent claims from creditors, filing and paying taxes, and distributing your assets. Generally, probate is a rigid and rigorous legal process that involves a great deal of time and money to complete.
Will probate occur in multiple states if I have property in multiple states?
Yes. Unless your living trust owns your property, probate occurs in every state where you own property.
Is there a way to avoid probate?
Yes. You can often avoid probate by creating a living trust. Because living trusts are legal entities that own your assets for you, they are not subject to the probate courts.

Living Trusts

What is a living trust?
A living trust is a legal entity that owns your assets, yet allows you to remain in complete control of them. Living trusts are also sometimes referred to as revocable trusts. The terms living and revocable refer to the fact that the trust can be changed or revoked as long as you are alive and competent. While the living trust owns the assets, you retain all the incidents of ownership. This means that you can buy, sell, and borrow against your assets as you always have while they are in trust.
How difficult is it to change my living trust?
So long as you are competent, you can change your trust at any time with minimal legal fuss.
What's the difference between a revocable and an irrevocable trust?
The term revocable means that the trust you create can be revoked at any time. This allows you to change the trust in any way you like until you pass away. When you pass away, your trust becomes an irrevocable trust; the terms are then set in stone and cannot be changed. Certain estate planning techniques might also create an irrevocable trust while you're alive. It's best to become educated about the applications of both revocable and irrevocable trusts to determine which best fits your personal circumstances.
Who are the trustors or grantors of a trust?
The trustors or grantors are the people who establish the trust. In most cases, they are also the people who fund the trust. If you and your spouse or domestic partner are creating a trust, the two of you will be trustors.
Are successor trustees personally liable for debt owed by the estate?
No. A trust is a separate legal entity and consequently responsible for its own debt.
Can my successor trustees change my trust?
No. Your successor trustee is not allowed to alter the trust in any way. However, if your successor trustee is your surviving spouse or domestic partner, you can permit them to change your beneficiaries or the percentages your beneficiaries receive. This is a smart arrangement when partners plan to leave their entire estate to their joint children and the surviving partner might need flexibility for issues such as divorce, drug abuse, incarceration, or estate tax planning.
Can the successor trustee take advantage of my trust to his or her own ends?
Not really. Your successor trustee is bound to act with fiduciary responsibility regarding your trust. This means that he or she is legally bound to act in the best interests of the trust and is usually forbidden from self dealing. That being said, unlike a will, there is no court oversight. The only people who would know if a successor trustee is not acting within the bounds of fiduciary responsibility is the beneficiaries. It's rare, but there have been cases where successor trustees have taken advantage of trusts. If you're worried about it, you can always assign a trust protector whose responsibility it is to watch over the successor trustee.
Who is a "trust protector"?
A trust protector is someone who is assigned to keep an eye on your trust and your successor trustee to make sure everything is carried out according to the trust document. Basically, it's a safety valve between the successor trustee and his or her potential abuse of the trust. Your trust protector has the power to take legal action against a successor trustee who is not handling the trust properly, self-dealing, or otherwise acting unethically.
What happens to my trust if I get divorced?
If both of you are trustors and trustees of the trust, you will terminate the trust as part of the divorce process and remove the assets from the trust. You can then create a new trust as single person.
What happens if I remarry?
If you remarry, you may need to create a new estate plan that covers both of you.
Do I have to take a living trust through probate?
As long as the trust is written and funded properly, you do not have to take a trust through probate. A trust is a separate legal entity and therefore, does not have to be processed through the probate system.
Even if I have a relatively small estate, can I still have a living trust?
Yes. The size of your estate does not necessarily affect whether you can or should choose a will or a trust. Other considerations beyond size include the ability to design an efficient system for your estate to be managed if you're incapacitated or to have a smooth transition of guardianship if you have minor children.
Can I have a trust if I am single?
Absolutely. If you were to become incapacitated and not have a written estate plan, only your family would have the power to go to court to seek power to manage your affairs. If you're single, a living trust can make life easy on your family in taking care of you and your assets should you become incapacitated, especially if they live far away or are not best suited to manage your estate.
Is an AB Trust actually two different trusts?

An AB Trust is like two trusts in one. One set of documents creates the trust, however, the trust itself is split in two as soon as one spouse passes away. Upon the death of the first spouse, the trust is split into an A Trust and a B Trust. The A Trust is for the surviving spouse and the B Trust is the decedent spouse's trust. In the trust documents, you can determine which assets flow into the A Trust and which into the B Trust. The surviving spouse can also make this decision at the time of the first spouse's death. A set of rules then applies as to how the spouse is allowed to manage each of the trusts.

The AB trust isn't as common as it once was because under current federal estate tax laws, you don't need an AB trust to take advantage of both spouse's estate tax exclusion. Nowadays, the AB is used primarily for creditor protection or if the spouses have different beneficiaries.

What are the rights of the surviving spouse as trustee?
To some degree this depends on the trust to which your spouse is trustee. Usually, a spouse will retain all incidents of ownership—the rights to buy, sell, or borrow against property in trust. There are exceptions to this rule, but generally this is how it works.
What are the rights of the spouse to the decedent's B Trust?
As long as the surviving spouse is named successor trustee of the B Trust, which is usually the case, he or she can use funds in the trust to maintain his or her lifestyle. However, some technical restrictions apply in that the surviving spouse can only use principal from the trust to maintain the quality of life that he or she has been living. For all intents and purposes, this means that your spouse can use these funds as he or she wishes.
What are the rights of the spouse to the A Trust?
The A Trust is the surviving spouse's trust. He or she has full rights to this trust.
Can the surviving spouse change beneficiary designations on the B Trust?

No. The surviving spouse is not allowed to change beneficiary designations on a B Trust.

However, if your successor trustee is your surviving spouse or domestic partner, you can permit them to change your beneficiaries or the percentages your beneficiaries receive. This is a smart arrangement when partners plan to leave their entire estate to their joint children and the surviving partner might need flexibility for issues such as divorce, drug abuse, incarceration, or estate tax planning.

What does "Q-Tip" mean?
Q-TIP is not just a cute white stick with cotton on the end. In estate planning, it stands for Qualified Terminal Interest Property. It's sometimes the C of an ABC Trust. The B Trust can also be a Q-TIP Trust. The Q-TIP Trust is created to allow a surviving spouse to take advantage of an estate tax saving statute. This means that to establish a trust of this nature, the surviving spouse must retain the right to any income made from the C Trust. However, he or she is not allowed to spend any of the principal in the C Trust. Depending on your situation, we can help you determine if a Q-TIP trust is a good choice for you.
What happens to assets outside of my living trust?
Any assets not owned by your trust will either be handled through the probate court or perhaps through a will substitute such as beneficiary designations. If you want to ensure that all of your assets are accounted for, you can create a Pour Over Will. This will states that assets left out of the trust pour over into the trust. However, this transition still has to be processed through the probate court.
What does "funding a trust" mean?
Funding your trust is the process by which you transfer ownership of your assets into the name of the trust. It is one of the most critical steps in creating a trust, so we take great care to help our clients through the process. Any assets not owned by your trust must be processed by probate if a will substitute isn't employed.
Will I lose control of my assets with a living trust?
No, as long the trust is properly written and you correctly transfer assets into the name of the trust. Since you name yourself as trustee to the trust, you still maintain full control of your assets.
Why do I have to give up ownership of my assets to the trust?
It's an efficient and valid method to keep your assets out of court if you've died or you're incapacitated. If you're incapacitated and your assets aren't owned by a trust or jointly held with your spouse or domestic partner, a court must appoint a conservator to manage your assets. The trust being a separate legal entity, ensures that your assets are not subject to probate. If the trust does not own the assets, they will go through probate.
How does a living trust affect the way I file taxes while I'm still alive?
It doesn't. Everything about your financial life remains essentially the same with a living trust for as long as you're alive. You'll file taxes the same way that you always have and sadly, a living trust doesn't make taxes any more fun and exciting.
Can I still borrow against my home (or other assets) if it's in a living trust?
You can. Most lenders will require you to first remove the property from the trust in order to finalize the refinancing or loan. Afterward, you're permitted to return the property to the trust. It's a ridiculous step, but generally required.
Do I have to have a living trust for every state?
No. You don't have to have a different living trust in every state. You do not have to have it reviewed in every state either. In your trust document, you choose the state laws that will govern your trust. As long as your trust is valid in that state, it will be valid in every other state.

Attorneys

How important is an estate planning attorney?
A good estate planning attorney is one of the most powerful allies you can have, but a bad one can be your worst enemy. It is essential to find a good estate planning attorney if you are going to create an estate plan that meets your needs, is legally executable, and can be properly settled. You're also going to spending time talking about your life, your family, and your desired legacy, so choose someone you like and feel comfortable with.

Can’t find the information you’re looking for?

No problem. Just take a moment to contact us and we’ll do our best to answer your questions and help you through the process.