Estate Planning Frequently Asked Questions

Estate Planning Frequently Asked Questions

A Revocable Living Trust is an estate planning document that enables us to avoid probate court and override the state’s intestacy laws. In other words, this document allows for you to transfer your estate (money and/or property.) to your intended beneficiaries without the need for court intervention upon your death

There are three main roles under a Revocable Living Trust:

  1. The person who creates the trust is known as a “settlor”, “trustor” or “grantor”.
  1. The person who makes the decisions regarding the trust assets is known as the “trustee”. The trustee can be an individual or an entity and there can be more than one trustee serving at the same time (co-trustees). The original/first serving trustee is usually the settlor/trustor/grantor. Once the original trustee passes, a successor trustee is named to assist in the administration and winding down of the decedent’s estate.
  2. The person or persons who receive the assets of the trust at the death of the trust creator (settlor/grantor/ trustor) are known as beneficiaries. Beneficiaries are the individuals who receive money or benefits from the revocable living trust after the settlor’s death. While the creator of the trust enjoys the benefits of his/her assets during their lifetime, a trust allows him/her to dispose of their assets to the named trust beneficiaries.

Like a will, a revocable living trust can provide for the distribution of your assets upon your death. However, a living trust does much more than just that. A living trust allows the trustee to continue to hold and manage the trust assets for the benefit of its beneficiaries, provides you with an instrument for managing your assets during your lifetime, and authorize the trustee to manage your assets for your benefit.

A revocable living trust can protect your assets from Medi-Cal for those assets that are properly titled in the name of the trust. In June 27, 2016, Governor Brown signed legislation SB 833 which greatly reduced the scope of California’s Medi-Cal Estate Recovery against the estate of deceased Medi-Cal beneficiaries who died on or after January 1, 2017. This legislation limited Medi-Cal recovery to only those estate assets subject to California probate that were owned by the decedent at the time of their death. (See Change to Estate Recovery effective January 1, 2017 due to Legislation SB 833).

A Pour-over Will serves as a back-up for any property that might not have been properly transferred to the Living Trust during the trust creator’s lifetime.  A pour-over will “pours over” property into a trust at the decedent’s death and is intended to guarantee that any assets that were somehow not included in the trust become trust assets upon the decedent’s death. Property left through the will must go through a probate court proceeding before it goes into the trust unless the estate qualifies for a California Simplified Probate Procedure.

While both documents work to name who will inherit your assets, both documents differ in various ways. For instance, a will, although drafted prior to your death, does not go into effect until you die, whereas a Trust is effective immediately upon its signing and funding of it.

 A will is a legally enforceable document that states how a testator (the creator of the will) would like their estate distributed upon their death, can nominate guardians for the testator’s children, and specify final arrangements at testator’s death. While a will provides simplicity in comparison to a living trust, that simplicity comes with its drawbacks. A will does not avoid the probate process and offers limited control in the distribution of assets to the name beneficiaries.

A living trust is a legal instrument that holds property while the trustor is alive and avoids the probate process once the trustor passes for property properly titled in the name of the trust. A trust also allows for the management of the property placed in the trust while the trustor is alive and offers greater control over when and how your assets are distributed to your name beneficiaries.  Once the trustor dies, the appointed trustee directly administers the property to the beneficiaries that are named in the trust.

Keep in mind that after you create a Trust, you also need to fund it by transferring assets to it, making the Trust the owner. This does make Trusts a little more complex to set up, but note that Trusts have one major benefit over Wills. They’re often used to minimize or avoid probate entirely, which is a huge plus for some people. This alone could more than justify the additional complexity of setting up a Trust.

Yes. You can have both a will and a living trust because both play different roles. While a trust provides for the management and distribution of your assets during your lifetime and at your death, a will allows you to name guardians for your children and appoint an executor of your estate. When you set up a living trust you it is important to also set up a will, a pour over will. This type of will is set up to work in conjunction with a living trust to offer you the best protection for your assets.

A Durable Power of Attorney is a legal document in which you (the “principal”) gives someone (“agent” / “attorney in fact”) the authority to manage all the affairs of the principal should the principal become unable to do so. This document does not have a set time period and it becomes effective immediately upon the incapacitation of the principal and expires at the principal’s death. The durable power of attorney was created to allow it to continue to be in effect after mental incompetency. The word “durable” means that the power of attorney continues to be effective after the principal becomes mentally incompetent.

Being mentally incompetent means that the person lacks the mental ability to make informed decisions or is incapable of communicating those decisions. In addition to mental illness, this can also be due to disease, or an injury (such as one resulting in temporary unconsciousness or a coma). It may also be referred to as being mentally disabled or incapacitated.

Moreover, a durable power of attorney can become effective as soon as it is properly signed, or it can become effective only if the principal becomes mentally incapacitated. In this situation, you would not only be creating a durable power of attorney but also a springing power of attorney (because it “springs” into effect upon the occurrence of a future event).

Here are examples of tasks your agent / attorney-in fact can do:

  1. Make bank deposits, withdrawals or other transactions
  2. Trade stocks and bonds
  3. Pay your bills
  4. Buy or sell property
  5. Hire people to take care of you
  6. File your tax returns
  7. Arrange the distribution of retirement benefits
  8. Negotiate and sign contracts
  9. Apply for benefits like SSI or Medi-Cal

Your agent can do almost anything the Power of Attorney permits. You can also limit the kinds of financial decisions you want your agent to be able to make. 

Finally, a durable power of attorney may also serve as a nomination of a conservator to handle your finances if an argument or contested matter arises which cannot be resolved without the court’s intervention. Please note that this power should only affect the management of assets that are not held in your trust. Any assets held in your trust should be managed by your trustee.

Advance health care directives, or living wills, inform physicians and family members about your health care wishes when you cannot make medical decisions yourself. When experiencing sudden incapacity, this document allows for you to name an individual (“agent”) to carry out your preferences in medical treatment and interventions. This document provides guidance to your chosen agent in making medical decisions that are consistent with your wishes if you become incapacitated. While the most common purpose of this document is to advise physicians about your preferences for life-sustaining measures, an advance health care directive can also provide guidance in nutrition, hydration, resuscitation and organ donation.

An illness and/or an injury can cause severe stress for everyone involved. It is not uncommon for arguments to surface among family members regarding the medical treatment that a loved one should receive. It is especially important to have an advance health care directive to enforce your health care wishes when arguments ensue. An advance health care directive may also avoid conservatorship altogether, or at a minimum, nominate the person of your choosing to serve as conservator and inform the court of your wishes in the event it becomes necessary.

A HIPAA Waiver is a legal document that allows an individual’s health information/records to be released/disclosed to a third-party as required under the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

The HIPAA waiver of authorization allows the entities covered under the act (i.e. health care providers, health plans, etc.) to provide information on a patient’s health to third parties authorized in your signed waiver. These third parties can include researchers, attorneys, other health care providers or family members, among others. 

A guardianship nomination document establishes who you would like to care for your minor children in the event that you and the other parent pass away. In this document, you are able to specify the person or persons you would like the court to appoint as your children’s legal guardian(s). 

There are two types of guardians:

  1. Guardian of the Person

The guardian of the person is a non-parent who is allowed to make decisions about the care, custody, control and education of a child. For instance, guardians of the person are responsible for providing food, clothing, shelter as well as for meeting all the educational and medical needs of the child. A guardian of the person essentially provides for the child’s safety and nurtures them physically and emotionally.

  1. Guardian of the Child’s Property/Estate 

A guardian of the child’s property/estate is one who manages the income, money or any other property the child owns and/or inherits.

While most individuals choose one legal guardian for both the person and the child’s property/estate, that does not have to be the case. 

NOTE: The guardianship nomination document comes into play only after both you and the other parent are deceased or incapacitated. It is important to keep in mind that your chosen/nominated person must still be approved by the court and that person must follow state law requirements when acting for your children. Although the courts have the last say in whom to appoint as the guardian(s) of your child(ren) (by considering several factors, including your child’s best interests), your nominations are given considerable weight during this process. 

A living trust may be changed, modified, amended or revoked if the living trust is “revocable” and if the amendment, modification, change or revocation is done during the lifetime of the trust creator(s), settlor(s)/trustor(s)/grantor(s). However, keep in mind, that any changes, modifications, amendments or revocations may be dependent on the terms outline in the original trust. 

For instance, if you drafted a revocable living trust with a spouse, and the trust includes a clause stating that at the death of the first spouse, the spouse cannot make any changes, then the spouse may not be able to modify the document. 

NOTE: A revocable living trust becomes irrevocable at the death of the Trustor(s)/Grantor(s)/Settlor(s).

A trust amendment is a legal document that changes specific provisions of a revocable living trust but leaves the other provisions unchanged. On the other hand, a restatement of a trust or an amendment and complete restatement, completely replaces and supersedes all of the provisions of the original revocable living trust. If you are planning on doing various changes on your living trust, it may be a better option to do a complete restatement to avoid confusion.

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