Estate Planning FAQs

What is a living trust? estate planning 3

A trust is merely an agreement, like a contract, between two parties. The person establishing the trust (the “Settlor”) and the person holding the property (the “Trustee”) hold property for the benefit of another (the “Beneficiary”). In a typical living trust, these three legal “persons” are the same person: you. The term “living trust” means that the trust is established and funded during your lifetime, as opposed to a testamentary trust which is created in your will and must go through probate to be funded. In order for a trust to be a valid, binding instrument, all that is necessary is for the parties executing it to have the legal capacity to enter into a contract, including age and competency, and for the trust to actually own something (the “corpus”). To fund the trust, you can assign, deed and transfer your assets into the existing trust, including your real property. Once the trust is signed, dated and acknowledged by a Notary Public, it is in full force and effect. Neither your trust nor your will need to be recorded, with the exception that the deed transferring real property is recorded with the applicable Recorder’s Office.

What decisions do I have to make to create my estate plan?

You should decide on:

  1. Who will be the successor trustee in the event of death or incapacity;
  2. If you have minor children, who should be the Guardian;
  3. Who will make health care and financial decisions for you if you cannot make them yourself; and
  4. How your estate will be distributed at your death.

Alright I am ready to get started. What do I need to do? estate planning egg 4

As mentioned in the previous answer, first you should decide on some important estate planning considerations. You also might want to keep reading because there’s tons of information below. But if you’re really ready to get started, you have two options:

  1. You can make an appointment for a FREE consultation, where we go over your situation, answer your questions, and I’ll make a recommendation for your estate plan. The consultation is about an hour. From there, once all the decisions are made in your estate plan, we can get your plan completed in about 1-2 weeks. Click here to make an appointment, or you can contact us directly to make an appointment (or if you’d like to make an appointment on a weekend or after hours).
  2.  You can do your estate planning entirely online! Click here to access our Online Estate Planning Portal.

What do I do if I need to make a change to my estate plan or the laws change?

It is very easy to make changes to your estate plan. We can either do a quick Amendment to your estate plan, changing only the provision(s) we want to change, or do a Restated Amendment. A Restated Amendment completely rewrites your estate plan; so it will have all the new language if there have been any legal changes which would affect your trust; and will allow you to implement any changes you need to make to keep your trust current. However, the Restated Amendment keeps your existing trust name and date, so you do not need to re-title any of the assets already titled in the name of the existing trust.

Why, exactly, do I need an estate plan?

Most of us spend a considerable amount of time and energy in our lives accumulating wealth & assets. With this, there comes a time to preserve wealth both for your enjoyment and for future generations. A solid, effective estate plan ensures that your hard-earned wealth will remain available for your care and will remain intact when it passes to your beneficiaries.

 estate planning 12What happens if I die without an estate plan? Does the government decide what happens with my property?

Yes. But your family may not like it. The government’s estate plan is called Intestacy and guarantees government interference in the disposition of your estate through probate. It’s an expensive, time-consuming court process. Documents to appoint an Administrator must be filed with the Probate Court and their approval must be obtained. If you fail to plan for your estate; you lose the opportunity to protect your family from a complex process that can be timely and costly; and which might have unwanted consequences in the distribution of your estate. Additionally, you have to consider estate taxes. There is much you can do in planning your estate that will reduce and can even eliminate estate taxes.

What’s the difference between a will and a living trust?

A Will is a legal document that describes how your assets should be distributed in the event of death. The actual distribution, however, is controlled by a legal process called probate, which is Latin for “prove the will.” Upon your death, the Will must be filed with the Probate Court and becomes a public document available for inspection. Probate can be cumbersome, time-consuming and expensive. A Living Trust avoids probate because if your assets are properly placed in the trust, the trust becomes the owner of that asset. Like a corporation, a trust is not a living person, so if your trust owns your assets, technically there’s nothing for the probate courts to administer. Whomever you name as your “successor trustee” gains control of your assets immediately upon your inability to act as trustee and they are distribute your assets exactly according to your instructions. There is one other crucial difference: A Will doesn’t take effect until your death, and is therefore no help to you during lifetime planning, an increasingly important consideration since Americans are now living longer. A Living Trust offers protection should you become disabled. Please note that even with a Living Trust, you should still have a Will known as a “pour-over will”; which makes sure that any assets not in your Living Trust at the time of your death, “pour-over” into the trust to be distributed with the other trust assets. Your Trust Package will include all of the necessary estate planning documents including a “pour-over will”.

If I have a living trust, can I be my own trustee? estate planning 14

Yes. In fact, most people who create Living Trusts act as their own trustee. If you are married, you and your spouse can act as co-trustees. During your life, you will have absolute and complete control over all of the assets in your trust. In the event of a mentally disabling condition, your hand-picked successor trustee assumes control over your affairs.

What happens if I move out of California? Is my estate plan still valid?

Yes, a Living Trust is valid in all fifty states, plus the District of Columbia. Should you move, however, you should have a local estate planning attorney review your estate plan to be sure no changes need to be made due to local law. Often, for example, your financial and medical powers of attorney should be updated to the forms specific to the new state.

Aren’t estate plans only for those who are really rich, like if you have more than $10+ million?

No. A Living Trust can help anyone protect his or her family from unnecessary probate and court costs, and federal and state estate taxes. Any person with an estate large enough to require probate will derive meaningful benefits from a Living Trust. In fact, those with less than the estate tax limit have more to lose in a costly probate than a family with millions.

Will a living trust help me save on estate taxes?

If your estate is subject to either federal or state estate tax, a trust can save substantial taxes for a married couple. These savings are obtained by being able to use the exemption amount at each death, instead of just at the death of the surviving spouse. However, a Living Trust will not save any death taxes for an individual unless other deductions are available, such as charitable deduction if you give a portion of your assets to charity.

Will my estate have to pay estate taxes?

Whether your estate will be required to pay any tax on your estate at the time of your death depends on the size of your estate and the tax laws at the time of your death. Currently, an estate of under $5.45 million (for 2016 – the amount is adjusted every year) does not have to pay any federal estate tax.

Will  my living trust help to avoid income taxes?

No. The purpose of creating a Living Trust is to avoid probate, guardianship, conservatorship, and reduce or even eliminate federal and state estate taxes; it is not a vehicle for reducing income taxes. In fact, if you’re the trustee of your Living Trust, you will file your income tax returns exactly as you filed them before the trust existed. There are no new returns to file and no new liabilities are created.

Will a living trust help to protect my assets if I have to go into a nursing home?

No. Because you maintain complete control over your assets titled in your Living Trust, those assets are considered available for your use should you have to go into a nursing home. If you have questions about planning for nursing home care, Medi-Cal or VA benefit planning, use the links at the left and top to navigate to those sections.

If my estate won’t have to pay any estate taxes, why do I need a living trust?

Saving on estate taxes is just one of the benefits of a Living Trust. If your estate is over your state’s “small estate” limit (California’s is $150,000), then your estate must go through the expense and delay of a court administered probate proceeding at your death. Further, estate taxes have no bearing on the protections which a Living Trust (along with the appropriate health care power and general power of attorney) can provide in the event of your incapacity.

I have minor children. What happens if I die?

One of the most important things you can do as a parent is to protect your children, especially when they are minors. If you die, the Court will appoint a Guardian for any minor child; therefore, if you want to determine who that person will be, you need to designate your choice of the Guardian in your Will. If you do not decide, then a court will decide you will raise your children. Without a trust, the Guardian will also take charge of the assets going to the child, which will be under court supervision, until the child attains age 18. With a trust, when minors are the beneficiaries, your designated successor Trustee can manage and invest the trust funds, free of the costs and restrictions that arise when the Court appoints a Guardian. Often times, the person you may want to raise your children might not be the best person to manage the assets. With a trust, you can have the duties split or you can have the same person performing both functions. Additionally, with a trust, you can continue the management of a beneficiary’s assets to whatever age you desire; certainly beyond age 18. The management of a beneficiary’s assets in a trust can include disbursement of assets and/or funds in increments, according to your directions (e.g., 1/3 distribution at age 25, 1/3 distribution at age 30, and the balance at age 35). Of course, during this period, the trustee can use any, or all, of the trust principal for the benefit of the beneficiary for such beneficiary’s health, education and support.

My spouse isn’t a US citizen. Are there any special problems or provisions for us?

Yes. A non-citizen surviving spouse can be required to pay substantial estate taxes at the first death if a proper estate plan is not in place. Depending on the size of the estate, it may be necessary to have your Living Trust set up as a “Qualified Domestic Trust” to avoid the payment of any taxes at the first death. We will create the appropriate trust for you based on the information you provide in the assembly process.

Once I create my living trust, what do I have to do?

Other than making sure that you title any newly acquired asset in the name of the trust, the simple answer is “nothing”. Once a trust is created and funded, it will continue on until it is revoked or it is distributed pursuant to its terms. There are no on-going costs or fees to establishing a Living Trust; nor are there any separate accountings or tax returns required during your lifetime. IRS Regulations provide that a revocable living trust uses the tax identification number of the Grantor — your Social Security Number — as its identification number and no separate tax returns should be filed for the trust.

Can I transfer real estate into a living trust?

Yes. In most cases real estate should be transferred into your Trust. Otherwise, upon your death, depending on how you hold the title, there will be a probate in every state in which you hold real property. When your real property is owned by your Living Trust, there is no probate necessary.

What’s the difference between a “living will” and a “living trust”?

A “Living Will” is a document that describes your wishes regarding life support if you are ever in a terminal condition or irreversible coma. In California, we call this your Advanced Medical Directive. As mentioned above, a “Living Trust” deals with your assets either in the event of incapacity or at death. Both are very important and necessary parts of a proper estate plan and both are included in our estate plans.

I’m afraid of a disabling illness or injury. What would happen if I was disabled, either mentally or physically, and didn’t have an estate plan?

Unfortunately, you may have to become the subject of a conservatorship proceeding. If you become mentally disabled before you die, the probate court can appoint someone to take control of your assets and personal affairs. These court-appointed agents must file a strict accounting of your finances with the court. A Living Trust will help avoid this process because your assets are titled in the trust; and you have already appointed someone to act as the successor trustee of your trust if you are no longer able to act. Additionally, if you have created a Durable Power of Attorney and Health Care power; you have already given someone else the ability to make both financial and health care decisions on your behalf. In short, with a properly drafted and complete estate plan, you can eliminate the need for a conservatorship.

I’ve heard my old health care proxy/power of attorney may be outdated and invalid. Is this true?

Yes. New federal regulations known as the Health Insurance Portability and Accountability Act (“HIPAA”) imposes strict privacy regulations on the disclosure of individually identifiable health information. This necessitates the addition of specific release and consent authority in all health care powers before any health care provider can release medical information to your agents and interested persons. Because HIPAA has no “grandfather” exceptions, previously executed estate planning documents may now be useless unless the documents specifically address the HIPAA requirements. All heath care documents and the living trust included in our program are specifically HIPAA compliant and the HIPAA release provisions are made effective immediately.

I’m concerned about my pets. How can I make sure they’re cared for after I pass away?

You can create a “Pet Trust” as an option; this trust can be for a specific animal or animals or for whatever animals survive you. You can designate different trustees for the care of the pet and the amount allocated for the care of the animal. You will also have the option to designate a trust “enforcer”; this person is a third party who has the right to make sure the funds are actually being used for the care of the animal.

Ready to get more specific information?  You can reach me at 925.307.6543 or

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The information contained on this site is not intended as legal advice. You should consult qualified legal counsel before acting on any information on this site. Christina McPherson and the attorneys of McPherson Law Group are only licensed to practice law in the State of California, and will not advise anyone on the laws of any other state. If you choose to send an email to our firm, please do not include any confidential or sensitive information. The law firm has no duty to keep confidential the information you may transmit, and your email will not form an attorney-client relationship. If you choose to subscribe to our newsletter, that will not form an attorney-client relationship, and we will have no affirmative duty to advise you of changes in California or federal law.
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