THE BASICS OF ESTATE PLANNING

What is Estate Planning?

    ESTATE PLANNING is the process of preparing several essential legal documents to deal with a person’s wishes to distribute their property and appoint persons to look after their minor children after their death.  There are many benefits to this process.

What Happens if I Don’t Have an Estate Plan?

    If you die INTESTATE (death without will and/or trust), the law and court system will decide how to distribute your property and who will take care of your children.  There are numerous laws which determine how your property will be distributed (generally based on degree of relation).  Your estate will be filed in court where a judge will issue orders as to how to distribute your property.

Why Should I Have an Estate Plan?

    There are three (3) primary reasons to have an estate plan:

    1. Control—An Estate Plan allows You to decide who will receive your property (who, when and how much), rather than a law and/or a judge deciding where Your property is distributed.

    2. Privacy—An Estate Plan (with a trust, as opposed to only a will) will allow you to avoid PROBATE (the legal term for a court procedure dealing with property of a deceased person) and privately distribute Your property.  A Probate matter is a publicly-held proceeding where all of your documents are public records available for anyone to see.  There are also significant statutory Probate legal and administration fees.

    3. Estate Tax Avoidance—An Estate Plan can, in some instances, defer or avoid a percentage of estate taxes in certain high-dollar estates.

What is Involved in an Estate Plan?

    Generally, you will have an initial meeting with Your attorney to determine the type of Estate Plan that best suits Your needs.  There You will discuss issues such as to whom You want to leave Your property, and when, and who You would like to act as guardian of minor children in the event You pass away.

An Estate Plan generally consists of the following documents;

    1. An ESTATE DISPOSITION (or WILL)–This is the primary document that determines where Your property is sent after death, and who You would like to be the guardian of Your children.  Note, when custody of minor children and their assets is involved, You cannot bind the Court or the State by this document, but you can make your wishes known. A Court and/or governmental agency will likely be involved with respect to the custody of minors and appropriateness of the person in control of the child’s money (which may include the posting of a fidelity bond) in this event;

    2. A TRUST–Think of a Trust as an empty box with a set of instructions for Your TRUSTEE (the person You “trust” and who You appoint to carry out Your instructions as to how to dispose of Your property and when) to distribute it.  Generally Your assets are placed into the Trust at the time of signing to avoid Probate, but can also be “poured” into Your Trust when You die. The Trustee then follows Your instructions on how and when to distribute Your Property.  Trusts are revocable or irrevocable.

    3. MEDICAL POWERS (Health Care Directives)– These are standard State of California forms used for making medical decisions or giving others the power to make such decisions in the event You are unable to do so.

    4. POWERS OF ATTORNEY (optional)—A legal document where You authorize others to make financial and other property-based decisions for You. Your attorney will then prepare the documents which will be signed, witnessed, and in certain cases, notarized.  You and Your attorney will each keep a set for reference.  It is advisable to review (and possibly update or modify) Your Estate Plan at least once every five (5) years.


Other Types of Estate Planning Trusts

    1. A SPECIAL NEEDS TRUST— This type of trust is a specially created trust for  a trust tailored to a person with special needs that is designed to manage assets for that person's benefit while not compromising access to important government benefits.  There are various forms of these types of trusts and allow for the receipt of government benefits while still allowing assets to be used for the support of the special needs beneficiary.  These are generally either “first party” or “third party” types of trusts which has to do with ownership of assets, and whether or not the government must be reimbursed after the death of the beneficiary.

    2. An INSURANCE TRUST (ILIT)----An ILIT is an irrevocable life insurance trust.  This is a special type of trust designed to use the purchase of life insurance premiums to avoid estate taxes.  This is a highly specialized trust used as a method of passing a life insurance policy to beneficiaries to avoid estate taxes.

Conservatorships and Guardianships

    These are legal proceedings to obtain custody and/or control of assets over children (GUARDIANSHIP) or “incompetent” (this is a legal term) adults (CONSERVATORSHIP).  These can either be over the person (physical custody) or the estate (property and financial), and can either be one person or more than one person, depending on circumstance.

    For a guardianship or conservatorship, the person(s) wishing to be a guardian or conservator files a legal proceeding with the Court, explaining the need for the process.  After one or more hearings the Court generally then issues papers and orders appointing a guardian or conservator of the person, estate, or both.

Time and Cost:

    Generally, barring special circumstances, an Estate Plan can be prepared in one (1) to two (2) weeks, once all the necessary decisions have been made.  Conservatorship and Guardianship proceedings are Court proceedings which, depending on the time to obtain the necessary paperwork and hold one or more Court hearings and takes several months in Los Angeles County from the time the paperwork is filed.  Estate plans are generally billed on a flat fee basis, while court proceedings like guardianships and conservatorships are billed hourly.

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Encino, CA 91436

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