Estate planning is a daunting task for most people. Many are inclined to put it off for the future. However, the reality is, there are no guarantees in life when it comes to how long we may have on earth. If you die without an estate plan in place, chances are that a sizeable burden will be cast upon your loved ones and beneficiaries. Therefore, the prudent thing to do for yourself and your heirs is to plan for the future and stop putting off the necessity of planning your estate.
Most of our estate planning clients come through our doors with some sense of confusion and trepidation. Here are five typical questions that many estate planning clients have as they commence to plan their estates.
1. Do I need a Trust?
In California, if the decedent’s assets are worth more than $150,000, then the estate must go through the expensive and time consuming process of probate. A Will alone is not enough to avoid probate. If your assets such as real property, stocks, business, and/or bank accounts are worth more than $150,000, a Trust can be crucial in avoiding probate and allowing the Trustor to specify disposition of assets, designate specific beneficiaries for all the assets, and appointing trustees to manage the assets.
A Revocable Trust is freely revocable and amendable. Such a trust can be changed or eliminated in the future. Revocable Trusts are very flexible documents that not only avoid probate, but usually allow for the transfer of management of assets in instances where the people who created the trust (the Trustors) become incapacitated.
2. After I create a Trust, what happens to my assets?
Many people are under the assumption that once their trusts are executed, they do not have to worry about transferring their assets to the trust. This is not correct.
If your trust is not funded, it will not achieve its full purpose. Funding means transferring your assets to your trust. It involves the following steps:
Physically changing the title to your assets from your name (or joint names if you’re married) to the trust’s name.
Possibly changing the beneficiary designations on insurance policies and retirement accounts to your trust.
These steps are crucial in avoiding probate. Even if your attorney sets up your trust properly, the trust only serves its purpose if it is funded with your property. If your assets are not transferred to your trust, your assets will have to go through the probate process at significant expense to your estate.
3. What do I want to do with my home?
For many of our clients, a home is their biggest asset. Therefore, whether or not you have paid off the mortgage on your home, you will want to determine what you want to happen to your home at your death. Do you want loved ones to be able to reside in your home? If so, will they be paying rent and/or paying for the maintenance and upkeep costs associated with your home while residing in it? If you have more than one child, do you want to distribute the home outright to your children and have them decide what to do with it? Or do you wish your trustee to sell the home and distribute the sales proceeds to your beneficiaries?
These are all important questions to ask to avoid conflict later on in life amongst your heirs and beneficiaries.
4. Who do I select as my trustee?
Your trustee will manage your trust assets after your death and prepare them for distribution in accordance with the terms of your Trust. Your trustee can be a family member that is willing to take on the task of serving as your trustee and is financially prudent to handle the process of trust administration. If you do not have someone in mind or wish to appoint a neutral third party to serve as your trustee, we have a solid network of professional fiduciaries to provide so you can select a trustee that best fits your needs.
5. Who will care for my pets?
If you want to guarantee that someone will care for your pets after your death, then you may need a pet trust that will allow you to set aside a certain amount of money to take care of your beloved companions. The trustee of the pet trust can utilize the money you have set aside for your pets to care for your pets after your death.