Q: What is Estate Planning?
A: Estate Planning refers to a coordinated plan to manage your affairs if you are unable to do so while living, and a plan to manage your affairs at death. It often involves four core documents: a revocable trust, a pourover will, a durable power of attorney and an advance health care directive.
Q: What is a Trust?
A: At its simplest, a Trust is a way of holding your assets. You transfer assets into the trust, they are administered for your benefit during your lifetime, then they are distributed to your beneficiaries when you die- all without the need for court involvement. You can change your mind about the Trust even after it’s established- you can amend it or name a new Trustee, enlarge or reduce the share for beneficiaries- it’s entirely up to you. Having a Trust usually avoids the need for Probate (which is not the case if you only have a Will).
Q: What is a Will?
A: A Will sets out who should receive your assets when you die, and names an “Executor” to manage your estate. The Will is turned over to the Superior Court, who then oversees the entire “probate” process (see below). A “Pourover” Will is used in conjunction with a Trust. The Trust holds your assets and explains who gets what when you die. The Pourover Will is there as a backup- it confirms that any assets left out of the trust should “pour over” into the trust.
Q: What is Probate?
A: Probate is a court supervised process that includes paying your debts and expenses, accounting for your assets to the court, and asking the court for permission to distribute the assets. Both the executor and his/her attorney are entitled to fees set by law. The Executor must also obtain a bond. The probate process usually takes 9-12 months in Los Angeles County.
Q: What if there’s no Will?
A: If there’s no Will (and no other estate planning), then your estate is subject to probate and the assets are distributed to your heirs according to the law. In other words, you have no input on who gets what. The same timetable and fees apply.
Q: I’m not rich- why do I need one?
A: Estate plans are for everyone, not just rich people. Even if you have very modest assets, you will want to name someone to act on your behalf if you are ever incapacitated (for example if you suffer a stroke, are in a car accident, or otherwise cannot act for yourself). You will also need to decide who receives what when you die. Otherwise a judge will appoint someone to handle your assets and personal care, and your assets will be distributed according to a formula set by the law.
Q: What are the durable power of attorney and advance health care directives for?
A: If we are rendered unable to act for ourselves, who will act for us? For example, if you are in a car accident and knocked unconscious…then lapse into a coma, who should the doctor speak to about your care? Who should check your bills to make sure everything is paid? These are the concerns that drive the need for “powers of attorney”. A power of attorney gives another person the right to act on your behalf, if you cannot act yourself. A power of attorney for financial issues is a durable power of attorney (for assets), the advance health care directive addresses your medical decisions.
Q: What if I change my mind?
A: That’s fine. Every element to the estate plan- the Trust, Will, Power of Attorney and Health Care Directive- can be changed whenever you want. None of these documents are set in stone. They exist only at your direction. Sometimes, more sophisticated estate planning involves irrevocable trusts, which cannot be changed once they are established. We can talk more about these if you wish.