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Things To Consider When Estate Planning

Estate Planning Papers

What exactly is an Estate Plan? Isn’t it only for the wealthy?

An Estate Plan is designed not only to pass assets at your death, but also to provide management of your personal and financial affairs while you are living. Wealth is only one factor when considering whether to do an estate plan. A properly devised estate plan is intended to avoid a probate at death, avoid the potential for a conservatorship during life, provide clear instructions on how to manage your affairs while living, how to distribute assets at death, and how to care for spouses, minors, or disabled heirs, all in a manner that minimizes expenses and tax implications to the greatest extent possible.

What exactly is “Probate?”

Probate is a court supervised administration of a deceased person’s estate. It is a lengthy public proceeding that follows strict procedural formalities as mandated by the California Probate Code. A typical probate lasts about a year, but could last longer. The expense of a Probate is broken down into attorney’s fees, executor’s fees, and costs (costs include court filing fees, publication fees, recording fees, etc.). Fees for the attorney and executor are statutorily based on a percentage of the gross value of the Probate Estate (“gross” meaning the value of the estate is not offset by any debts or mortgages owed). By way of example, the combined attorney’s and executor’s fees to probate a $300,000.00 home (even if the home is encumbered) would be $18,000.00 plus additional costs averaging $1,500.00. These fees and costs do not include any other expenses such as taxes.

What is some basic terminology I should know about Estate Planning documents?

A typical trust-centric estate plan includes a Revocable Living Trust, Pour-Over Will, Durable General Power of Attorney, and an Advanced Health Care Directive.

Revocable Living Trust: This document is a legally binding contract wherein the creator of the trust (called the Settlor/Grantor/Trustor) enters into an agreement with the Trustee (or manager of the assets) to manage the Settlor’s assets according to the terms of the contract for the benefit of the Beneficiary (the person receiving the benefit of the assets). Typically, the Settlor may also be the initial Trustee and initial Beneficiary of the Trust.

PourOver Will: If you have a trust-based estate plan, then your Last Will and Testament will be used to transfer certain assets into your trust at the time of your death. It will “pour over” certain assets into the Trust that you did not transfer into your Trust prior to your death. The creator of the Will is called the Testator. The Testator nominates an Executor to administer the Will, however, only the Probate Court appoints the Executor to administer the Will.

Durable General Power of Attorney: This document, also known as a Financial Power of Attorney, allows the Principal (the person creating the document) to appoint an Agent or Attorney-in-Fact to manage assets held in the Principal’s individual name such as retirement accounts, vehicles, or life insurance policies. It typically does not allow the agent to manage or access assets held in the Revocable Living Trust (only the Trustee of the Trust can manage Trust accounts). A Springing Durable General Power of Attorney only goes into effect once the Principal becomes incapacitated, whereas an Immediate Durable General Power of Attorney becomes immediately effective once the Principal signs it.

Advance Health Care Directive/Power of Attorney for Health Care: This document allows the Principal to designate an Agent to make health care decisions on the Principal’s behalf if he or she is unable. It also contains a written set of instructions or guidelines about the Principal’s wishes regarding life-sustaining treatment.

filing trust papers

What information should be included in my Trust?

As stated above, a Trust is a legally binding contract and is therefore unique. A Revocable Living Trust should contain detailed instructions covering three important periods of your life:

  1. What happens while you are alive and well;
  2. What happens if you become mentally incapacitated; and
  3. What happens after your death

It should define all the players of the Trust (Settlor/Trustee/Beneficiary); it should nominate successor Trustees; it should clearly define how a Trustee can resign or be removed and what authorities a Trustee has; it should state who gets the Trust’s income and principal and in what manner; it should provide clear instructions on what happens at the death of the first spouse (i.e. does the Trust require a division into two or more sub-trusts at the spouse’s death); it should provide clear instructions on where the assets go at the Settlor’s death and in what manner. Finally, the Trust must be properly funded with assets (this requires formal retitling of certain assets, transfer deeds, etc).

What should I do to prepare for my Estate Planning appointment?

Here are some tips to help you get organized and prepared for your first meeting with an Estate Planning Attorney:

  1. Make a list of all of your assets and approximate values of those assets. You may wish to locate your real property deeds, property tax bills, life insurance policies, bank and investment accounts, etc.
  2. Decide who will be in charge of your financial and personal affairs if you are unable to do so yourself. Think about alternates or successor decision makers as well.
  3. Decide who will inherit your estate, how they will inherit, and when they will inherit. Consider their ages and any disabilities they may have as well.

What does an Estate Plan normally cost?

To help put this question into perspective, you should also ask yourself “what would it cost me not to have an Estate Plan?” The cost to prepare an Estate Plan depends on many factors, such as the client’s needs/wants (i.e., does the Trust divide into multiple sub-trusts for the beneficiaries), types of assets (i.e. are there several pieces of real property), the sophistication of the estate plan (are there business interests to address), tax implications, etc. In our area, most attorneys charge hourly for the initial consultation ($275-$375 per hour) and may charge a flat rate for the preparation of the Estate Plan ($1,500.00-$3,500.00+). Some may charge hourly for the preparation of the Estate Plan. You should ask the attorney what their billing practices are prior to retaining their services.

Nicole R. Plottel Certified Elder Law AttorneyNicole R. Plottel, Certified Elder Law Attorney is Managing Partner of the Firm. She is also a Certified Specialist in Estate Planning, Trust and Probate Law by The State Bar of California Board of Legal Specialization. Ms. Plottel is further accredited by the Department of Veterans Affairs to represent and present veterans’ claims and focuses her practice in the areas of Estate Planning, Medi-Cal/Veteran’s benefits, Probate and Trust Administration. She is a longstanding member of National Academy of Elder Law Attorneys (NAELA) and also volunteers on the Incapacity Subcommittee of the Executive Committee of the Trust & Estates (TEXCOM) Section of the State Bar of California. Ms. Plottel actively serves the local community as a Board Member for the Enloe Hospital Foundation and the Gateway Science Museum Community Advisory Board, and the Chico Community Scholarship Association. She is also a longtime advocate for the Alzheimer’s Association.